ZTE Claims Survival At Risk Due To US Sales Ban

Chinese telecommunications maker ZTE has claimed that its survival is at risk after the United States this week banned US companies from supplying it with components.

The move came due to an ongoing row over the company’s earlier contravention of US sanctions against Iran and North Korea – amid growing trade frictions between the US and China.

Also this week, the UK’s national cyber-security agency warned telecoms companies not to use equipment or services from ZTE, saying to do so would harm British national security.

US ban

The trouble for ZTE’s supply chain began on Monday when the US Commerce Department imposed a ban on sales by American companies to ZTE for seven years.

The US alleges that the Chinese company had broken a settlement agreement with repeated false statements, and the ban was to be punished for violating the terms of a settlement agreement.

ZTE immediately suspended trading of its shares on Chinese stock markets and delayed an earnings release. However, it also failed to provide guidance to consumers on how the ban will affect its ability to provide smartphone updates to the Android operating system.

And now ZTE has said that the US ban is unfair and threatens its survival, Reuters reported. It also vowed to safeguard its interests through all legal means.

“It is unacceptable that BIS insists on unfairly imposing the most severe penalty on ZTE even before the completion of investigation of facts,” ZTE was quoted as saying in its first response since the ban was announced.

BIS refers to the US Commerce Department’s Bureau of Industry and Security.

“The Denial Order will not only severely impact the survival and development of ZTE, but will also cause damages to all partners of ZTE including a large number of US companies,” ZTE said in a statement.

It seems that the Commerce Department does have an appeals process for companies to try to get off the list, but it is unclear whether ZTE can use this as its case had been previously subject to a settlement, people familiar with the matter told Reuters.

ZTE said it will explore legal measures to protect the legal rights and interests of the company.

Processor reliance

In China itself, ZTE has received a great deal of support domestically on social media, but newspapers have highlighted China’s heavy reliance on foreign semiconductors as a concern.

ZTE does have a number of interests in Western countries. For example BT formed a research and development partnership with ZTE in 2011.

But in 2012 the US House Intelligence Committee warned that both Huawei and ZTE posed a national security threat and recommended they are banned from the US.

Such warnings have been regularly repeated, and the US recently blocked the proposed takeover of Qualcomm by Broadcom on the grounds that it could boost Huawei’s influence over 5G standards.

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