* SoftBank hit by double whammy of Huawei and network disruption
* Tokyo Electron, Sumco among heavy losers after Huawei CFO arrest
* Top 5 selling phones in Japan are Huawei - Kakaku.com
* Mobile phone parts maker plunge
* Defense equipment makers soar after CNN reports on unidentified North Korean missile base
By Ayai Tomisawa
TOKYO, Dec 6 (Reuters) - Japan’s Nikkei closed at more than a five-week low on Thursday as chip-related stocks were hit after Canada arrested a top executive of Chinese tech giant Huawei at the request of the United States, threatening a new spike in Sino-U.S. tensions.
Losses intensified later in the session as index heavyweight SoftBank Group Corp tumbled, hit by the news about Huawei and a partial disruption to its mobile phone service.
The Nikkei share average lost 1.9 percent to end at 21,501.62, its lowest closing level since Oct. 30.
Canada’s Department of Justice said on Wednesday Huawei’s global chief financial officer Meng Wanzhou is now facing extradition to the United States. The arrest is related to violations of U.S. sanctions, a person familiar with the matter said.
Meng’s arrest could inflame tensions between China and the United States just days after presidents Donald Trump and Xi Jinping agreed to steps to resolve their trade war at a meeting in Argentina.
The probe of Huawei is similar to one that threatened the survival of China’s ZTE Corp,, which pleaded guilty in 2017 to violating U.S. laws that restrict the sale of American-made technology to Iran.
Analysts said that while the U.S. and China intensify their confrontation, Japan may be caught in the middle.
“The U.S. is shifting its focus to a national security issue from a trade issue,” said Norihiro Fujito, a chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“Japan is its ally, so there are concerns that Japan will ban contracts with Huawei and ZTE, and if that happens, Japan’s manufacturers will get hurt seriously.”
The chip sector was vulnerable, with Sumco Corp tumbling 6.6 percent, Shin-Etsu Chemical dropping 3.4 percent, Tokyo Electron shedding 4.5 percent and Advantest Corp declining 5.3 percent.
SoftBank, which is listing its mobile unit on Dec. 19, skidded 4.9 percent.
Last year, SoftBank and Huawei jointly demonstrated various potential use cases for a 5G network, which provides ultra-high throughput, ultra-low latency transmission, and edge computing, to SoftBank’s business partners.
Mobile phone parts makers were battered, with TDK Corp plunging 6.6 percent and Anritsu Corp tanking 7.4 percent.
According to gadget ranking site Kakaku.com, the five most popular phones in Japan are made by Huawei.
Moving in the opposite direction, defense-related stocks advanced strongly after CNN reported that new satellite images obtained by it revealed that North Korea has significantly expanded a key long-range missile base located in the mountainous interior of the country.
Ishikawa Seisakusho gained 0.9 percent and Hosoya Pyro-Engineering jumped 6.7 percent.
The broader Topix dropped 1.8 percent to 1,610.60. (Editing by Simon Cameron-Moore)