Tuesday, 18 December, 2018

U.S. tough penalty hurts ZTE and many others

The ZTE Axon The ZTE Axon
Oscar Goodwin | 27 April, 2018, 00:57

According to The Wall Street Journal, the United States prosecutors in NY have begun investigating whether Huawei, the leading Chinese smartphone maker and one of the largest telecom equipment manufacturer, violated USA sanctions against Iran.

Seen as an extension to the ongoing bilateral trade spats, the US Department of Commerce has imposed a ban on ZTE for sanctions violations, prohibiting American firms from selling components to the China telecom equipment maker for seven years. "No matter what difficulties we encounter, we can only survive and thrive by doing our own business well and serving our customers better", he said.

ZTE has already paid $890 million in fines and penalties and could face additional penalty of $300 million for violation of USA export sanctions. The New York Times last April reported the US Treasury's Office of Foreign Assets Control subpoena, issued in December 2016, following a Commerce Department subpoena that summer.

Just how important is the USA for Huawei, which is already the world's third-largest smartphone maker by sales?

In February, Senator Richard Burr, the Republican chairman of the US Senate Intelligence Committee, cited concerns about the spread of Chinese technologies in the United States, which he called "counterintelligence and information security risks that come pre-packaged with the goods and services of certain overseas vendors". January started with the news that the U.S. government had intervened to kill deals that Huawei was making with Verizon and AT&T, which would have helped the Chinese company sell its flagship Android phones in the US.

Huawei and ZTE have denied these allegations. The company failed to comply with the punishment set forth by the U.S. Commerce Department and now is banned from receiving U.S. exports until March 2025. The Wall Street Journal says that the worse- case scenario facing Huawei is a similar USA export ban.

The Chinese company came under US pressure in 2012 when a congressional report concluded both Huawei and ZTE could become a tool for state-sponsored spying or sabotage.

"America's investigation has no impact on our company", a chief executive from Huawei, the world's third-biggest mobile phone company after Apple and Samsung, told reporters from National Business Daily (NBD), a financial newspaper in China, on Wednesday evening.

According to a copy of the letter obtained by Reuters, ZTE said the order should be "very concerning to all", since it took effect without warning to the industry, without waiting for the results of an independent internal investigation due at the end of the month, and without recognition for all the improvements in its export compliance program.

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