TechTheDay

ZTE, the provider of that magnificent Axom M, has once again been given a ban by the USA. This isn’t the first time the telecommunications company was given a trade ban by the USA: in 2016 ZTE was also given a trade ban because the company was caught trading with Iran. At that time, the US claimed that ZTE was using legal complex manoeuvring of controlled items with the help of ZTE Kangxun Telecommunications, Beijing 8-Star and ZTE Parisian.

New Ban

This new ban restricts US companies from trading with ZTE Corp for a period of seven years. This ban could potentially cripple the company as it deprives it of the required equipment, software and materials needed by ZTE to continue its operations.

China and the USA have been on the brink of a trade war recently as the two world powers threatened each other with tariffs that worth billions of dollars. The reason USA banned ZTE trade this time is that ZTE allegedly failed to punish the employees caught illegally selling USA goods to Iran, even claiming that ZTE rewarded those employees. Of course, China reacted and threatened to take actions to protect the interest of Chinese firms.

Currently, American companies provide 25 to 30 percent of the components used by ZTE. This includes materials needed to build communication networks and phones. The ban may also cover software for smartphones and may include applications such as Google Maps, Gmail and Youtube. This may actually cripple ZTE enough to force it out of business.

ZTE Reacts

Of course, ZTE reacted to the ban, citing that it had done everything else that the USA required it to do, even implementing SAP. They said in a statement that it’s not acceptable and that the BIS is insistent on imposing unfairly  the most severe of penalties on ZTE even prior to the completion of the investigation. They have been ignoring ZTE’s continuous diligent work and the progress made on export compliance. They also pointed out that they did indeed punish those involved with the Iran deal.

They also asserted that the ban is not only going to affect ZTE’s survival and development, it will also affect their US partners who are prohibited from trading with ZTE. This includes Qualcomm, that named ZTE as one of their largest partners. They also pointed out that this move may affect their employees in the USA, at a time when Donald Trump promises to bring employment back to the US.

Other Sources

In the end, ZTE may be forced to find other suppliers. China is encouraging and favouring their own companies and local suppliers so they can accelerate their own development to act as a replacement for ZTE’s American partners. ZTE however, will do what it takes to overturn the ban and will put an effort in resolving the issues through communication.

ZTE’s Other Problems

ZTE’s problems don’t stop with the US. Even the UK is taking steps in warning their sectors about using equipment from ZTE. This is all because last two months ago, US senators introduced a legislation to block their government from purchasing or selling equipment from ZTE and Huawei. Their concern is that since they are Chinese companies, there is a danger of them helping China on spying on the US, saying that China “does not play by (their) rules…” and that they must be vigilant against any possible risk to national security. The biggest that can get affected by this is Qualcomm, who provides the chipset used by Huawei and ZTE. Losing both Chinese companies as partners could hurt Qualcomm a lot as they lose two customers at once.