Samsung's telecom equipment revenue has seen significant growth over the past year, which has encouraged continued investment in this sector. As one of Huawei's most formidable competitors, Samsung is seizing the opportunity presented by 5G network expansion. It was reported that Samsung plans to start mass production of 5G chips in 2019, signaling a strategic move into this high-growth area.
In 2017, Samsung Electronics' telecom equipment business generated $3.5 billion in revenue, marking a 60% increase from the previous year. Operating profit surged by 186%, reaching $542 million. These impressive figures have driven Samsung to further invest in its telecom equipment division. Additionally, entering Huawei's home market gives Samsung a unique advantage, making it a key driver behind the company’s growing focus on this sector.
[Image: Samsung wants to fight Huawei, plans to mass produce 5G chips next year.]
Huawei has long viewed Samsung as a major rival in the smartphone industry. With strong performance in the Chinese market, Huawei has been expanding globally and now holds a prominent position in Europe, just behind Samsung and Apple. On a global scale, it is closing in on Apple and aims to overtake it as the second-largest smartphone brand this year.
The success of Huawei's mobile phone business is closely tied to its strength in the telecom equipment market. After securing a position second only to Ericsson, Huawei has positioned its mobile phone division as a new growth engine. This strategic support has helped Huawei rise to become the leading domestic smartphone brand, laying the foundation for its challenge against Apple and Samsung.
Huawei's telecom equipment division leads the global market. Samsung, as a diversified conglomerate with top-tier positions in TV, semiconductors, and mobile phones, has the resources and expertise to support new ventures effectively.
Historically, when Samsung identifies a promising business area, it tends to commit substantial resources to gain a competitive edge. Faced with Huawei's efforts to challenge its dominance in smartphones, Samsung is likely to respond strongly. The telecom equipment sector, with its potential and current opportunities in the U.S. market, is a natural choice for such a move.
Due to various challenges, Chinese telecom equipment providers like Huawei and ZTE have struggled to enter the U.S. market. Currently, the four major global vendors are Huawei, Ericsson, Nokia, and ZTE. However, U.S. carriers are looking for alternatives, and Samsung is stepping in. Verizon, the largest U.S. carrier, has already named Samsung as a key supplier for 5G equipment, with large-scale 5G network deployment planned this year, offering Samsung a valuable opportunity.
Samsung is also interested in strengthening its chip business, with plans to begin mass-producing 5G chips next year. This will allow it to offer operators a comprehensive solution—from equipment and chips to terminals—helping to reinforce its position as the world's largest smartphone manufacturer.
For Huawei, the emergence of Samsung as a competitor in the telecom equipment space could be problematic. Nearly 60% of Huawei's revenue comes from this segment. If Samsung enters the market, Huawei may face a two-front challenge. This could force Huawei to reallocate resources to defend its telecom equipment leadership, potentially easing the pressure it faces in the smartphone market.
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