US bans Chinese telecom firm ZTE from buying American tech for 7 years
Restriction comes after ZTE fails to punish employees for illegal shipment to Iran and North Korea.
The US Commerce Department imposed a ban on Monday, April 16 against Chinese telecommunications-gear maker ZTE for violating sanction terms against Iran and North Korea. The ban prohibits the Chinese firm from purchasing components from American firms for seven years.
In March 2017, ZTE received a combined civil and criminal penalty and forfeiture of 1.19 billion US dollars (¥7.46 billion) after illegally shipping telecommunications equipment to Iran and North Korea. But instead of reprimanding the staff and senior management involved, ZTE paid full bonuses to them. “This egregious behavior cannot be ignored,” US Secretary of Commerce Wilbur Ross said in a statement.
The ban could be catastrophic for ZTE since American companies provide about 25 to 30 percent of the components used in its equipment, including smartphones and gear to build telecommunications networks, according to a Reuters estimate.
Google’s mobile services including Google Play App Store are likely to be covered by the ban, said Richard Windsor, an independent analyst at Radio Free Mobile. “There is a distinct possibility that ZTE will no longer be able to make devices that run Google services.” According to a Bloomberg unnamed source, ZTE lawyers have been meeting with Google officials about the issue.
On the same day, the UK’s National Cyber Security Centre warned the country’s telecommunications companies and regulator against using ZTE equipment and services, citing “potential risks” to national security.
China’s Ministry of Commerce said on Tuesday that it “will closely follow the developments” in the ZTE case, and will “take necessary measures to protect Chinese companies’ legitimate rights and interests.”
The US ban against ZTE comes at a delicate time when the two countries have threatened each other with waves of new tariffs on tens of billions of dollars of exports.