It May Just Be The End For ZTE

The U.S. invokes a 7 year ban on US companies selling to ZTE.

The U.S. Commerce Department has banned American companies from selling hardware and software to ZTE for a period of seven years. The penalty is due to the company violating U.S. sanctions by shipping U.S. goods to Iran and North Korea.

The company plead guilty to the accusations last year and agreed to pay $890 million in fines. In addition to the monetary damages, the company agreed to dismiss four senior employees, and discipline 35 others through reduction in bonuses or disciplining them. In March, the company admitted that while it had dismissed the four senior employees, it had taken no action on the 35 others.

These actions mean that ZTE will have a very difficult time remaining relevant outside of China. It is estimated that 25%-30% of components used in ZTE manufacturing come from the U.S. Qualcomm’s chipsets reside in 50%-65% of ZTE’s devices. While the company may be able to easily transition to using MediaTek chipsets, the software is another issue.

The companies smartphones run Android, and in the world of Android, Google is king. The operating system itself is free, and it is likely there will be no hindrance to continue using the operating system on their phones. Google Play Services and Google Apps are another story altogether. The use of these services and apps are licensed. If ZTE is cutoff from providing Google Play Apps and Services on their devices, they will have an extremely difficult time producing a competitive product outside of China. It was only last month that Google cut off “Uncertified Android devices” from being able to sideload their services.

Google has not commented on the orders as of this time.

Source: ReutersArs Technica


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