Chinese smartphone maker ZTE barred from U.S. technology

Chinese smartphone maker ZTE barred from U.S. technology

The Commerce Department said Monday it will prohibit American companies from selling products to ZTE, which violated the terms of a deal made after the US alleged that ZTE skirted sanctions against North Korea and Iran.

An export ban means United States component makers will be banned from selling to ZTE, which regularly buys handset chipsets from Qualcomm, and optical components from such companies as Maynard, Acacia, Oclaro and Lumentum, Jefferies equities analyst Edison Lee wrote in a report titled "All hell breaks loose". The company had been selling its equipment to Iran and North Korea, which was a major no-no under the trade agreement.

This time previous year, Chinese electronics giant ZTE pled guilty to violating sanctions on Iran and North Korea. As part of the initial agreement, ZTE was allowed to continue to work with US companies, assuming it adhered to the rules laid out in the agreement.

Mashable has reached out to ZTE to get its take on the accusations Secretary Ross and his department are levying against ZTE. The company will now be banned from incorporating any commodity, software or technology from USA companies in any of its products. Some ZTE smartphones sold in the USA are equipped with Qualcomm chips. Historically, Viavi has done more business with Huawei than ZTE, but ZTE's rise as a clear No. 2 in China and other parts of the world has forced the company to shift more of its attention and sales focus to ZTE in recent years, specifically as it relates to its 5G infrastructure planning (which has little to no revenue today).

According to the press release, this denial order against ZTE is a regulatory action and has nothing to do with the ongoing trade war between the U.S.A and China.

Shares of Taiwan's MediaTek Inc, which sells smartphone chips and competes with Qualcomm, were not trading when the announcement was made.

The UK's National Cybersecurity Centre (NCSC) has written to UK telcos warning them that using network equipment manufactured by Chinese firm ZTE would negatively impact the UK's national security.

ZTE, whose Hong Kong and Shenzhen shares were suspended on Tuesday, said it was assessing the implications of the United States decision and was communicating with "relevant parties".

A five-year federal investigation found last year that ZTE had conspired to evade USA embargoes by buying US components, incorporating them into ZTE equipment and illegally shipping them to Iran.

On its website, ZTE says it is the fourth largest supplier of smartphones in the USA, serving all four major wireless operators with low and mid-price handsets - including devices for pre-paid plans. ZTE promised to discipline employees involved in the scheme. The company was required to discipline certain employees as part of that agreement. ZTE did fire the four execs, but it failed to institute any punishment for those 35 employees.

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