U.S. bans American companies from selling to Chinese phone maker ZTE

Optical Stocks Under Pressure After US Bans Sales To ZTE

Secretary Ross Announces Activation of ZTE Denial Order in Response to Repeated False Statements to the U.S. Government

The Department of Commerce has now learned that ZTE made false statements to the US government during the 2016 settlement negotiations as well as the 2017 probationary period.

While ZTE can continue to sell its products in the United States, being unable to use parts from Qualcomm, Intel, and other US companies could prove to be devastating to the firm. The U.S. court ruled that ZTE had to pay $890 million in penalties with a possible additional penalty of $300 million.

The action today stems from an fine imposed on ZTE one year ago, March 23rd, that totaled $1.1 billion - a record, the Department said - after the USA determined the company engaged in "a multi-year conspiracy to violate the US trade embargo against Iran to obtain contracts to supply, build, operate, and maintain telecommunications networks in Iran using USA -origin equjpment, and also illegally shipping telecommunications".

According to the report from Reuters, ZTE has often used components from us -based companies like Qualcomm, Intel, and Microsoft in its products. In March, however, the firm admitted that it hadn't disciplined the 35 employees, or even reduced their bonuses. While the company went ahead with the launch, there is no announcement about the AT&T partnership. Acacia Communications Inc, which got 30 percent of its total 2017 revenue from ZTE, tumbled 35 percent, hitting a near two-year low.

ZTE "provided information back to us basically admitting that they had made these false statements", said a senior department official. The company will now be banned from incorporating any commodity, software or technology from U.S. companies in any of its products.

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ZTE officials did not immediately respond to requests for comment. The majority of the ZTE smartphones in the United States are sold by the carriers. That means that any shipments by US firms of parts to ZTE are blocked.

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.

Commerce said ZTE's actions "demonstrate a pattern of deception, false statements, and repeated violations" and that "ZTE still can not be relied upon to make truthful statements, even in the course of dealings with USA law enforcement agencies, and even with the prospect of the imposition of a $300 million penalty and/or a seven-year denial order".

The new restrictions stem from a January 16 report by a US monitor appointed by a federal judge in Texas who accepted the guilty plea in March 2017.

The move is the latest crackdown on telecom equipment suppliers by governments around the world who are showing increasing concern about using telecoms networks supplied by Chinese companies. Although Commerce Department officials would not discuss the report, they said the department followed up in February.

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