ZTE Banned From Using Hardware & Software from US Companies for 7 Years


"It stands to reason that ZTE - without access to critical components from the US - could have a drastically compromised ability to deliver products and compete", said George Notter, a Jefferies analyst in a report.

But as the Commerce Department revealed in its order filed today, ZTE never reprimanded its 35 lower-level employees, and worse, it made false statements to the Department about its compliance.

For ZTE itself, the latest USA action means one of the world's top makers of smartphones and communications gear will no longer be able to buy technology from American suppliers, including components central to its products. Likewise, the ban also means that that the maker of the popular Snapdragon processor is out a revenue stream for the next seven years.

ZTE used third-party companies to hide the export of USA components to the sanctioned countries, and then hid the information by "sanitising databases" with information on the sales. As part of the agreement, ZTE said it would dismiss four members of senior staff to discipline 35 more.

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According to reports, part of the deal ZTE had made with the USA government was that it would not give bonuses to employees who had acted illegally in the past, but it failed to follow through on that promise. "It's certainly going to make it very hard for them to produce and will have a potentially significant short and long-term negative impact on the company". Qualcomm declined to comment on the matter, while Acacia did not respond to an inquiry. Unless Samsung agrees to sell it some Exynos chips, or Huawei allows a rival access to the Kirin line of SOCs, this could prove to be a windfall for MediaTek.

ZTE didn't address the developments in the United Kingdom, where the country's National Cyber Security Centre warned phone carriers that using the Chinese company's equipment and services poses risks to national security. It was further noted in the denial order that ZTE was "repeatedly lying to BIS and other US law enforcement agencies and engaging in a cover-up scheme to destroy. remove, or sanitize evidence".

Mashable has reached out to ZTE to get its take on the accusations Secretary Ross and his department are levying against ZTE.

According to the Financial Times, a letter from the NCSC to companies states that the United Kingdom telecoms network already contains a "significant amount" of equipment supplied by Huawei, also a Chinese manufacturer.

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The fiasco is just the latest point of tension between the Chinese mobile company and the US government.

The action comes in response to ZTE pleading guilty to violating sanction rules by conspiring to sell equipment to Iran. ZTE also sells handset devices to USA mobile carriers.

"We believe Huawei, Nokia and Fiberhome are best positioned to pick up business ZTE loses in China", Leopold said in a report.

The settlement involved telecommunications gear that ZTE supplied to Iran that contained USA components in violation of a trade embargo.

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