ZTE and the U.S. Department of Commerce reached a settlement agreement in March 2017. The U.S. government previously believed that ZTE violated a U.S. ban between 2010 and 2016 by exporting communications equipment to Iran and North Korea and concealing these transactions through shell companies.
ZTE acknowledged this practice and agreed to pay a fine of 1.19 billion U.S. dollars to suspend the implementation of the seven-year export embargo. However, during the delay in the implementation of the embargo, ZTE continued to provide false statements, leading the U.S. Department of Commerce to open a 7-year ban on ZTE.
Some people believe that the U.S. move is to crack down on smart phone manufacturers supported by the Chinese government and the Chinese communications industry because ZTE is a listed state-owned enterprise.
Prior to this, ZTE completed its expansion into the global smartphone market. Last year, the company became the world’s ninth-largest smartphone manufacturer, with annual shipments reaching 43 million units. About 70% of the equipment was exported abroad, and about half of the equipment entered the US market. The data shows that ZTE has approximately 12% market share in the US smart phone market. With this share, ZTE has become the fourth largest smart phone manufacturer in the US market.
Equipment such as ZTE Axon7 are equipped with Qualcomm or Intel processors
In terms of key technologies, ZTE relies heavily on its U.S. partners. The U.S. ban will undoubtedly have a huge impact on ZTE. In the smartphones made by ZTE, parts supplied by US suppliers account for about 30% of all parts, and ZTE annually imports a large number of processors from American chip makers such as Intel and Qualcomm.
In addition to hardware, software is also a huge issue for ZTE. The current global smartphone market is dominated by two operating systems: Apple's iOS and Google's Android. The mobile phone used by ZTE is using the latter, but the U.S. ban threatens to prohibit ZTE from using the system for the next seven years.
In addition, this ban in the United States is also very likely to affect ZTE's 5G network.DevelopmentIt is planned that ZTE will regard this technology as their future growth driver. At the end of February this year, the company had just announced that they had reached cooperation with Intel and Qualcomm in this area.
In addition to ZTE, the trade friction between the United States and China may also hit China’s largest communications equipment manufacturer Huawei. On April 7, this year, the US Federal Communications Commission (FCC) stated that they plan to prohibit U.S. operators from using the Universal Service Fund to purchase equipment from "security threat companies." The Universal Service Fund is a government-supported project that can provide broadband services to rural America and provide low-cost mobile phone subscriptions for low-income mobile phone users.
The FCC's move is aimed at Huawei and ZTE. The U.S. government suspects that China may use the equipment of these two companies to monitor the U.S. citizens because both Huawei and ZTE have a Chinese government background. US legislators began to pay attention to Huawei and ZTE in 2012 and asked them to stop cooperation with the Chinese government.
The U.S. ban on ZTE has not only hurt Chinese companies. ZTE and Huawei have been the main buyers of Qualcomm and Intel chips. Long-term trade disputes will also hurt these American companies. (Monthly)