The news of the 7yr ban from the U.S selling sensitive products and software, to the Chinese company ZTE, is a major major deal. What this means for a wide variety of companies, products, and services that rely on the Chinese tech giant, remains to be seen.
First off, let us address the ban and why it happened. The band was imposed after the US caught ZTE shipping US goods to Iran. In 2012, ZTE had signed contracts with Iranian telco providers that would allow ZTE devices to be placed on Iranian store shelves. However, some of those devices had hardware and software that originated from the US, which is a violation of Iranian trade embargoes imposed by the US government.
After ZTE plead guilty, there was an agreement in place to punish rogue officials within the ranks, ZTE released 4 Sr staff members involved but did not fire the remaining 35 individuals who were implicated as well.
This has now prompted the Trump administration to respond heavy-handed, and worst of all it is in the midst of both China and the US posturing up against each other with high threats of billion-dollar tariffs in what just may lead to a trade war between the two countries. This may effectively be the straw that breaks the camels back as the Chinese government is not going to take this band lying down.
ZTE may not be widely known to the western world on a commercial scale, but they are one of the leaders in telecoms technology and also at the forefront of the new 5G network advancements alongside their fellow Chinese counterparts, Huawei.
ZTE relies tremendously on American companies like Google, Qualcomm, Intel & Microsoft to power the bulk of their devices. Not being able to use the Android operating system and purchase chips from Qualcomm who are the clear leaders when it comes to silicon is a blow that they may not be able to overcome.
ZTE also works with carriers worldwide to build their LTE networks and has partnered with some of the American service providers to build their infrastructure as well. In the Caribbean, ZTE’s main partner to build their network infrastructure is Digicel.
The reason why this is going to have major implications on not just products and infrastructure in the US and around the world if ZTE cannot recover, but also China is looking to ramp up their efforts to make American companies like Apple & Google, harder to operate in China. China right now is currently the largest smartphone market in the world, followed by India, and then in 3rd place sits the US.
The 7-year ban has been seen as pretty harsh as there could have been other ways to resolve this issue to keep trade flowing, but this is looking like another attempt to hurt China.
Britain’s main cybersecurity agency has also written to organisations in the UK’s telecommunications sector warning about using ZTE devices in the interest of national security.
It remains to be seen how things play out, but one thing is for sure, this is just the beginning.