ZTE and the U.S. Department of Commerce are at odds. The government agency issued a seven-year ban earlier this month that prevents ZTE from purchasing components from any domestic supplier. It’s a decision that came after the Chinese company failed to adhere to sanctions set in place after illegally shipping products to Iran. ZTE seemingly ignored the initial sanctions and thus earned itself a more severe punishment.
Along with a massive fine, ZTE was supposed to fire select executives and discipline other employees. That didn’t happen; therefore, the U.S. government stepped in and served a ban that has huge implications.
Both short-term and long-term effects are apparent. ZTE uses processors from Qualcomm, headquartered in San Diego. But the more worrisome loss could be its Android license. Since Google is located in the U.S. as well, ZTE may not be able to use Android with built-in Google Mobile Services. Once the ban becomes enforced, ZTE could be left without scrambling for replacements.
Based on a lengthy statement issued by the company, ZTE doesn’t appear too worried. It’s committed to resolving the issue and continuing business as usual. Whether or not that will happen, though, is very unclear.
The statement doesn’t deny ZTE’s wrongdoings. Actually, it’s rather forward in admitting to previous errors while continuing to reflect on “lessons from its past experience in Export Control Compliance.” ZTE says it now has a compliance committee and spent more than $50 million on the program last year.
Along with improvements internally, the company has provided the U.S. government with over 132,000 pages of documents.
ZTE doesn’t mess around with saying the penalty is unfair and far too severe. Aside from ramifications on its own business, the company’s statement points out “a large number of U.S. companies” are also affected. ZTE won’t accept the ban has any merit, either.
Here’s where the company goes on the offensive:
“In any case, ZTE will not give up its efforts to resolve the issue through communication, and we are also determined, if necessary, to take judicial measures to protect the legal rights and interests of our Company, our employees and our shareholders, and to fulfill obligations and take responsibilities to our customers, end-users, partners, and suppliers.”
The company will engage with the U.S. government in an effort to drop the button, but it’s not ruling out legal action.
If ZTE does take the matter to court, we could see a showdown that reflects on trade relations between the U.S. and China. Suddenly, this story within the technology space would expand to politics.