USA bars China's telecom giant ZTE from buying United States components

NCSC warns UK telcos against ZTE equipment due to 'national security' concerns

The US Department of Commerce has banned American companies from selling components to Chinese telecom equipment makerZTE Corp for seven years after breaking an agreement reached after it was caught illegally shipping goods to Iran, US officials said on Monday.

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.

ZTE, headquartered in the southern city of Shenzhen, pleaded guilty in March 2017 and agreed to pay a $1.19 billion penalty for shipping the telecoms equipment to North Korea and Iran in violation of us regulations. The DOC, however, contends that ZTE failed to significantly penalize those employees.

ZTE will probably miss shipments and lose orders on handsets and transmission equipment as a USA export ban leads to a lack of components for China's largest-listed telecommunications equipment manufacturer, analysts said.

The Commerce Department said ZTE was supposed to fire four senior employees and discipline 35 others, whether by reducing their bonuses or issuing them a letter of reprimand. "This egregious behavior can not be ignored", US Secretary of Commerce Wilbur Ross said.

"We believe such a response could be similar across the entire USA component supply chain". As a result, ZTE is banned once again from exporting products made in the USA, until March 13th, 2025.

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Naveed Saeed of Engro Foods said the company will be able to reduce its energy consumption by 10 per cent, resulting in significant carbon emission reduction. 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. The move, which also dragged down some USA technology shares, reactivates a block on ZTE's exports and all sales to the company by U.S. suppliers for seven years.

Obviously, it has the potential to severely impact ZTE's business in a negative way.

ZTE has sold handset devices to USA mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp. According to Levy, adding ZTE into the mix would make it impossible to manage the security risks and "the result would be an unacceptable national security risk to the United Kingdom telecoms infrastructure environment". It has relied on USA companies including Qualcomm Inc, Microsoft Corp and Intel Corp for some components.

Qualcomm and ZTE appear to have suffered the latest wounds amid the brewing trade war between the United States and China.

While ZTE can continue to sell its products in the United States, being unable to use parts from Qualcomm, Intel, and other US companies could prove to be devastating to the firm.

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