Commerce bars USA companies from selling to ZTE

U.S. companies banned from selling components to ZTE		
		
	Brian Heater

       @	   
   	7 hours

The ban targeting ZTE comes as the US considers tariffs on up to $150 billion in Chinese imports as President Donald Trump tackles what he has said are unfair trade practices by Beijing.

"Instead of reprimanding ZTE staff and senior management, ZTE rewarded them", Commerce Secretary Wilbur Ross said in the statement.

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.

According to Reuters, U.S. firms contribute one quarter to one half of the material and components used in ZTE's smartphones and telecommuncations networks. In March, however, the company admitted that while it had fired the four employees, it had not disciplined or reduced bonuses to the other 35. Trading in ZTE shares were suspended today in response.

The US Commerce Department said that ZTE lied to American officials about punishing employees who violated US sanctions against North Korea and Iran. Well, companies like Qualcomm, Microsoft, and Intel all supply ZTE with components. "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".

The US Department of Commerce slapped a seven-year ban on sales to ZTE on Monday for breaking terms of an agreement reached last year after it was caught illegally shipping goods to Iran.

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Lumentum declined to comment, while others optical component makers were not immediately available for comment.

"If you look at ZTE it sells around 45 million smartphones per year globally, and nearly half of them have Qualcomm chips", said Neil Shah, research director at Counterpoint Research.

In a letter sent to telecoms firms, ZTE itself and regulator Ofcom, Ian Levy, director of the National Cyber Security Centre (NCSC), warned the use of ZTE equipment or services within existing infrastructure "would present risk to United Kingdom national security that could not be mitigated effectively or practicably".

ZTE said it was aware of the move by the US Commerce Department and that it is assessing the "full range of potential implications". Part of the settlement required ZTE to take action against employees involved in the violations, but instead engaged in a cover-up according to United States authorities. ZTE may have lied about all of that too, which is what pissed off the U.S. government. That settlement included a provision that, should ZTE again be found to be skirting U.S. trade laws, a seven-year export ban would be imposed.

In the US, government agencies are already prohibited from using equipment made by ZTE as well as by Huawei due to the risk of back doors and other cyber-threats being built into the firmware of the devices.

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