UK, US Governments Warn Against Buying ZTE Hardware

Visitors pass in front of the ZTE Corp. booth at the Mobile World Congress in Barcelona Spain

Unlike Huawei, ZTE is a state-owned company, which seems to raise more questions even for the United Kingdom government, which hasn't banned Huawei hardware yet. After the US placed export restrictions on ZTE in 2016 for Iran sanctions violations, the China's Ministry of Commerce and Foreign Ministry criticized the decision. Along with a huge penalty of $1.19 billion, ZTE can't use the hardware and software from the U.S. companies for the next seven years. ZTE pled guilty in a United States federal court to violating US economic sanctions against Iran and North Korea. "This egregious behavior can not be ignored", Secretary Ross said. In March, however, the firm admitted that it hadn't disciplined the 35 employees, or even reduced their bonuses. Now, it seems that ZTE will have to resort to companies like MediaTek for SoCs to use in its handsets. The biggest stinging point of this ban lies in ZTE's loss of access to Qualcomm components, including the Snapdragon line of SoCs. Acacia Communications Inc. shares fell by 34.7%, a drop influenced by the fact that almost a third of the company's 2017 revenue came from ZTE.

Reuters quotes a senior department official who said that the company "provided information back to us basically admitting that they had made these false statements".

ZTE didn't respond to calls seeking comment that were made after business hours in China.

Other smaller or less-well-known American companies have been negatively affected by the ban. "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 majority of the ZTE smartphones in the USA are sold by the carriers. It has relied on USA companies including Qualcomm Inc, Microsoft Corp and Intel Corp for components.

This is a regulatory action and is unrelated to any ongoing trade-related actions. The official, speaking on the condition of anonymity, said the timing of the ZTE action was unfortunate because it could seem related to US steps to stop alleged theft of intellectual property.

"ZTE misled the Department of Commerce". Although Commerce Department officials would not discuss the report, they said the department followed up in February.

The denial order against ZTE comes amid brewing tensions between the USA and China that have raised concerns of a trade war between the world's two biggest economies.

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