The recent $6.65 billion deal signed by Verizon led the telecommunication firm to request Samsung not to utilize Chinese components.
Samsung has been the top supplier of Android smartphones ever since Huawei was banned from the US market. Also, Verizon is one of the biggest network providers in the United States.
Ever since the ban, Samsung has tried to consolidate its position as the top Android manufacturing brand.
With the help of Verizon, the telecommunications company has signed a deal with Samsung to supply radio equipment and services for $6.65 billion.
Verizon wants Samsung to exclude Chinese components from $6.6B deal https://t.co/5cYwGLDiO9
— SamMobile (@SamMobiles) October 22, 2020
The restriction to use Chinese products
Samsung Network has been using Printed Circuit Boards (PCBs) made by Chinese companies SCC and Wus for its network kits for a long time. It was a good deal for the brand since it is the cheapest method to reduce its network kits’ cost.
According to a report by The Elec, South Korean PCB Maker Isu Petasys wanted to become the Samsung network supplier. Daeduck Electronics is also a competitor to Isu Petasys for the same.
South Korean companies have also not preferred to supply network kits to the brand since their demand has been deficient. According to a report by Giz China, SCC and Wus won around 3 trillion in full-year sales, 1.8 trillion units, and 1.2 trillion units, respectively.
Supply by Isu Petasys
Since the $6.65 billion deal is contingent on the conditions laid down by Verizon, the smartphone brand will have to come up with a solution. According to a report by Sam Mobile, Isu Petasys will soon start supplying network chips to Samsung.
Isu Petasys was not able to make profits earlier because of Samsung’s policy to make only small orders. Hence, it supplied network chips to companies like Cisco and Juniper. Isu Petasys also acquired Chinese PCB manufacturing company TTL back in 2014.
However, Isu Petasys could not normalize China’s operations and suffered a substantial operating loss of $24 billion last year, with USD 514.2 billion in sales.
But, using chips manufactured in China would also breach the request made by Verizon. Reportedly, Isu Petasys has been supplying PCB samples to Samsung from Daegu, South Korea.
The reason of Verizon for its request
As it seems, the reason for such a contingency by Verizon appears to be the ban on Huawei and any other suspicious Chinese companies.
The United States banned Huawei from all US markets quoting concerns for privacy as its reason. Hence, Samsung wanted to capitalize on the United States’ network business using the telecommunications company.
Fearing a ban from the US government, Samsung would not use any Chinese component in its network kits. To make the $6.65 billion a success, Samsung would have to balance Verizon’s conditions and the demands of Isu Petasys.
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