US Cuts off ZTE From American Tech Suppliers

17 April, 2018, 20:23 | Author: Larry Hoffman
  • U.S. companies banned from selling components to ZTE		
		
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Beijing has responded to the US' recent seven-year component ban on telecoms firm ZTE by saying that it is ready to take necessary measures to safeguard legitimate rights.

As part of the agreement, Shenzhen-based ZTE promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them, senior US officials told Reuters.

China telecoms firm ZTE Corp has been hit with a 7-year ban for a sanctions breach by the USA government.

And although the White House and the Committee of Foreign Investment in the U.S. has moved against China in recent weeks, it insisted that the new decision to block ZTE - already under investigation by the Barack Obama administration - is part of a backlash against the country which also includes countries such as Germany, Australia and Canada.

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The company's initial guilty plea was met with up to $1.2 billion penalties and fines, along with the dismissal of four senior employees, along with more fallout for lower-level employees.

The ban is a blow to the face to many USA companies that supply ZTE with components, including Qualcomm Corp., Lumentum Holdings Inc. and Finisar Corp., all of whose shares dropped after the announcement.

The first accusations against ZTE were for "conspiring to violate U.S. sanctions by illegally sending United States goods and technology to Iran", so the Chinese company had to pay $1.2 billion.

As U.S. concerns about safeguarding its chip technology and cutting its trade deficit grow, the tech sector has become a flashpoint in the broader battle about trade and economic policy, with U.S. President Donald Trump accusing Chinese firms of intellectual property theft for years.

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ZTE works with BT in a research partnership, but BT said that did not mean it would lead to a commercial deployment of its technology in the UK. Trump on Monday accused China along with Russian Federation of devaluing their currencies, opening a new front in his argument that foreign governments are exploiting the U.S.

According to Reuters, US manufacturers are estimated to provide up to a third of the components in ZTE's network equipment and smartphones, so the US action could have a disastrous impact on the Chinese business.

"ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company", ZTE's Chairman and Chief Executive Officer Zhao Xianming said at the time. ZTE was a regular purchaser from Qualcomm Inc., Intel Corp., Acacia Communications and lumentum Holdings Inc. ZTE may have to either buy from a competitor or get chips from a Taiwanese company whose products generally lag those of its USA rival's in performance.

The UK's National Cyber Security Centre (NCSC) warned the use of ZTE equipment would "have a long term negative effect on the security of the UK". ZTE already sells both its branded and white-label smartphones via mobile carriers AT&T and Verizon in the US.

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