Published: Mon, April 16, 2018
Business | By Kate Woods

ZTE banned from using US-based hardware or software in its products

ZTE banned from using US-based hardware or software in its products

American companies could be banned from selling equipment to ZTE for seven years.

ZTE was accused to circumventing USA sanctions on Iran back in 2016.

Under terms of the ban, US companies can not export prohibited goods, such as chip sets, directly to ZTE or via another country, beginning immediately. It also paid $890 million in fines.

This warning follows similar action from the U.S. government, which has long-prohibited American telecoms firms from buying network equip from Chinese firm Huawei, and last month went so far as to warn USA citizens not to use smartphones from the Chinese companies Huawei and ZTE. On April 16, Secretary of Commerce Wilbur L. Ross, Jr. Acacia Communications Inc, which got 30 percent of its total 2017 revenue from ZTE, tumbled 35 percent, hitting a near two-year low.

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Shares of optical companies including Lumentum Holdings Inc fell 6.8 per cent and Finisar Corp dropped 6 per cent. Oclaro Inc, which received 18 per cent of its fiscal 2017 revenue from ZTE, lost 17.4 per cent.

ZTE officials did not immediately respond to requests for comment.

Shortly after the order was issued, the National Cyber Security Centre also reached out to the United Kingdom's telecom entities saying that using any services or equipment provided by ZTE would be a national security risk. "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 U.S. are sold by the carriers.

ZTE is one of the many companies that source mobile processors from Qualcomm and it has done so for quite some time now.

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This is a regulatory action and is unrelated to any ongoing trade-related actions. The company can resume purchasing these components from the USA after seven years.

ZTE, which devised elaborate schemes to hide the illegal activity, agreed to plead guilty after the Commerce Department took actions that threatened to cut off its global supply chain.

Allowing Huawei, ZTE, and other related entities access to USA government communications would be inviting Chinese surveillance into all aspects of our lives. 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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Chinese telecoms equipment group ZTE Corp hit back in February against concerns from USA lawmakers that it is a vehicle for Chinese espionage, saying it was a trusted partner of its USA customers.

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