Published: Fri, April 27, 2018
Hi-Tech | By Kristin Zimmerman

China Must Respond to ZTE's US Ban

China Must Respond to ZTE's US Ban

According to The Wall Street Journal, the United States prosecutors in NY have begun investigating whether Huawei, the leading Chinese smartphone maker and one of the largest telecom equipment manufacturer, violated USA sanctions against Iran.

For some time now, the United States government and intelligence agencies have been warning consumers to not buy any Huawei smartphones.

The exports ban is choking ZTE, as U.S. suppliers make up three in every 10 of the Chinese company's supply chain.

ZTE was slapped with a seven-year export ban last week by the US Department of Commerce for breaching the settlement terms of violating US sanctions on selling telecoms equipment to Iran and North Korea. That is a crippling blow to ZTE's smartphone business since it could leave them without the ability to source Snapdragon chipsets and the Android operating system.

Huawei, the world's largest maker of telecommunications network equipment and the No 3 smartphone supplier, said it complies with "all applicable laws and regulations where it operates, including the applicable export control and sanction laws and regulations of the UN, US and European Union".

ZTE has already paid $890 million in fines and penalties and could face additional penalty of $300 million for violation of U.S. export sanctions.

Later that day, a senior US Commerce Department official told the Wall Street Journal that the agency had granted ZTE's request to present additional evidence on the case, even though the company does not have the right to make an appeal under the department's regulations.

Both companies also have been under scrutiny by USA lawmakers over cybersecurity concerns.

Chinese foreign ministry spokeswoman Hua Chunying said she had seen the report.

This suspicion of possible espionage has lead to the collapse of a deal that would being Huawei devices to U.S. telcos.

Huawei and ZTE have denied these allegations.

The ZTE representative on the call said it would be naive to think the ban was ordered in "a vacuum" and was assumed to be connected to the U.S.

Although ZTE will bear the brunt of the impact from the ruling by the US Department of Commerce, relevant US partners will suffer as a result.

The Chinese company came under USA pressure in 2012 when a congressional report concluded both Huawei and ZTE could become a tool for state-sponsored spying or sabotage.

The order "sends the wrong message" to other companies who may be considering settling with the Commerce Department over export control issues, ZTE said.

An export ban is also very likely on the table.

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