United States takes technology battle up a notch with ZTE export ban

Optical Stocks Under Pressure After US Bans Sales To ZTE

Optical Stocks Under Pressure After US Bans Sales To ZTE

USA authorities issued an order today barring USA exports of sensitive technology to Chinese telecom giant ZTE because of false statements made during an investigation into its illegal sale of goods to Iran and North Korea. While the company went ahead with the launch, there is no announcement about the AT&T partnership.

A five-year federal investigation found last year that ZTE had conspired to evade USA embargoes by buying US components, incorporating them into ZTE equipment and illegally shipping them to Iran. While it is not related to links between the ZTE and the Chinese government, it is actually because of shipping the United States hardware to the U.S. sanctioned countries. It also paid $890 million in fines. The Chinese company used a series of shell companies to sell its products in Iran, and after pleading guilty, it promised to terminate four senior employees and to discipline 35 others.

Under terms of the ban, US companies can not export prohibited goods, such as chip sets, directly to ZTE or via another country, beginning immediately. The biggest stinging point of this ban lies in ZTE's loss of access to Qualcomm components, including the Snapdragon line of SoCs. Acacia Communications Inc, which got 30 percent of its total 2017 revenue from ZTE, tumbled 35 percent, hitting a near two-year low. "It's certainly going to make it very hard for them to produce and will have a potentially significant short and long-term negative impact on the company". In response, the Department of Commerce instituted a full ban on any US exports to ZTE specifically for the next seven years.

The ban in the U.S. should not really come as a surprise to anyone as steps have been taken over the last few months to make it as unattractive, or illegal, to do business with Chinese firms.

ZTE has sold handset devices to USA mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp.

"ZTE misled the Department of Commerce.Instead of reprimanding ZTE staff and senior management, ZTE rewarded them.This egregious behaviour can not be ignored", Ross said.

From January 2010 to March 2016, the company shipped $32 million in United States cellular network equipment to Iran, and made 283 shipments of cell phones to North Korea, with the full knowledge of the highest levels of company management, officials said.

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