ZTE Is Banned From Purchasing Components Made By US Suppliers

A statement from the US Commerce Department said the ban was imposed because of false statements made by the company during talks in 2016 over a charge of shipping telco equipment to Iran and North Korea. This order was issued due to a breach of a settlement between ZTE and the United States government after ZTE was found violating Iran and North Korean sanctions.

The sanction against ZTE comes after the Chinese company pleaded guilty in 2017 for the illegal shipment of USA equipment to Iran and North Korea. The ministry also reported that the Shenzen-based company has worked in co-ordination with a lot of U.S. Companies and has contributed a lot of revenue to the country's job money creation fields. During that time, ZTE will be unable to get its supplies from companies like Intel or Qualcomm in an official capacity.

In addition to the monetary penalties, ZTE agreed to perform audits and to make truthful disclosures to federal investigators for the seven year probationary period.

Intel, Microsoft, Qualcomm and Micron Technology are also among U.S. suppliers to ZTE, according to data compiled by Bloomberg.

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The Hong Kong-listed shares of ZTE were suspended on Tuesday.

The investigation also revealed that ZTE had lied about disciplinary actions involving personnel who have been involved in the sanctioned activity, including saying it had dismissed personnel who had actually resigned or otherwise left the company years earlier.

The NCSC said it would be "impossible" to manage risks to the telecommunications sector if ZTE equipment was deployed at scale and that using ZTE equipment and services would have a "long term negative effect" on the security of the UK.

The sales ban came on the same day that it was revealed that the UK's National Cyber Security Centre (NCSC) has warned telecoms companies and other network operators of its "security concerns" with networking hardware made by Chinese vendor ZTE. Some ZTE smartphones sold in the USA are equipped with Qualcomm chips.

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The department also said that ZTE actually rewarded the employees involved in violating USA trade bans by giving them large bonuses rather than reprimands or financial penalties.

ZTE and Huawei's alleged ties to the Chinese government were also the subject of a United States congressional report in 2012 that focused on the equipment they make for telecommunications networks.

The move will sever business dealings between ZTE and USA firms for up to seven years.

China's Commerce Ministry said it would "stand ready to take necessary measures to safeguard the legitimate rights and interests of Chinese companies".

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"If they can't operate normally because of the USA export ban, that will clearly impact global and Chinese network construction and could affect future 5G rollouts", CICC analysts including Wang Xinglin wrote in a research note Tuesday.


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