US Cuts off ZTE From American Tech Suppliers

17 April, 2018, 20:23 | Author: Elena Summers
  • Secretary Ross Announces Activation of ZTE Denial Order in Response to Repeated False Statements to the U.S. Government

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.

US manufacturers have also been barred from selling components to the firm as part of a seven-year ban imposed by the US Department of Commerce.

ZTE and Huawei's alleged ties to the Chinese government were also the subject of a U.S. congressional report in 2012 that focused on the equipment they make for telecommunications networks. For more on this, read the full Reuters report here.

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.

"This will be devastating to the company, given their reliance on USA products and software", Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, said of the ban on supplying the company.

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.

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The company grew to become one of the world's biggest telecoms equipment makers thanks to its cheap and affordable smart phone technology.

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.

"China does not play by our rules, and we must be vigilant against Chinese threats to both our economic security and national security", said Republican Representative Robert Pittenger after the Commerce announcement.

The U.S. action could be catastrophic for ZTE since American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE's equipment, which includes smartphones and gear to build telecommunications networks. US President Donald Trump has already imposed tariffs on Chinese imports in recent weeks, and there is growing concern that China is racing ahead of the US in the all-important technology sector. Its products, including smartphones, use such American parts as microprocessors from Qualcomm, glass made by Corning, and sound technology from Dolby.

As reported by the Financial Times, the National Cyber Security Centre advised the UK's telecoms businesses on Monday not to work with the Shenzhen-based company because it would have a "long term negative effect on the security of the UK". ZTE has purchased chips from Qualcomm Inc.

The ban on supplying ZTE comes two months after two Republican senators introduced legislation to block the USA government from buying or leasing telecommunications equipment from ZTE or Huawei, citing concern the companies would use their access to spy on US officials.

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