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ZTE facing a rough time as US government punishes it again

by Justin Herrick | April 16, 2018April 16, 2018 11:00 am PST

ZTE won’t find any help in the United States after violating the terms of sanctions set in place last year.

The U.S. Department of Commerce has issued a seven-year ban that prevents any domestic supplier from selling to ZTE. In 2017, the Chinese company pled guilty in federal court for illegally shipping products to Iran. The U.S. government slapped ZTE with an $890 million fine, adding $300 million to that if more penalties are discovered.

It’s agreement with the U.S. included the departure of four key employees and discipline for many others. ZTE then admitted that, although it fired the executives involved, no one else faced any discipline. Because of that, the U.S. government needed to step in once again and issue more sanctions.

The decision is viewed as a significant blow to ZTE’s operations. In recent years, the company increased its reliance on both hardware and software components made by U.S. companies. ZTE can look to other suppliers, or it can start working internally on what’s necessary to continue expanding. Regardless of the path ZTE takes, it’s expected that struggles will hurt the company now and well into the future.

According to Reuters, analysts estimate that as much as 30 percent of the components used by ZTE come from U.S. companies. ZTE takes those components to sell products like phones and networking equipment.

ZTE certainly isn’t alone. Huawei has been facing allegations of spying on behalf of China, which killed any chance of its latest flagship being sold by major U.S. carriers. The latest sanctions on ZTE don’t involve espionage, but the company’s also been under scrutiny for the possibility.

As tensions between the U.S. and China grow, lawmakers and government agencies are urging domestic companies to be wary.

The next few months (and years) should be tough on ZTE, and that might leave an opening for another brand in the mobile industry to rise up. ZTE is one of the world’s most popular smartphone brand despite its lack of a high-end phone with global availability.

Reuters

Justin Herrick

Justin is easily attracted to power buttons. His interest in technology started as a child in the 1990s with the original PlayStation, and two...

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