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On April 16, the U.S. Department of Commerce announced that Chinese technology company ZTE can no longer buy U.S. products including electronic components and software to build its smartphone and networking products. The ban was imposed because ZTE violated a consent agreement by selling prohibited items to Iran and North Korea.
ZTE strongly objected to the decision in a statement to eWEEK saying, “The Denial Order will not only severely impact the survival and development of ZTE, but will also cause damages to all partners of ZTE including a large number of U.S. companies.”
ZTE stated that it has reflected on its lessons in export control compliance and is working to convince the Commerce department to reverse its decision. The company has assembled a so-called “world-class counsel” of compliance experts to provide the Commerce Department additional information about its recent steps to comply with export regulations.
Unfortunately, it will be difficult to convince U.S. regulators to lift the export ban, considering ZTE’s pattern of deceptive behavior, including a series of false statements spanning years, and a history of ignoring U.S. compliance rules, which includes knowingly selling prohibited items to Iran and North Korea.
While ZTE has many markets beyond the U.S., export limits will prevent ZTE from making anything anywhere that contains U.S. products. This is a major problem considering some critical products such as processors and modem chips are made by American companies. Even worse, rumors are circulating that Google may cancel ZTE’s license to use Android, which could prevent ZTE from continuing as mobile technology company.
It’s likely ZTE’s only chance at a pardon is by making a case that U.S. companies will be hurt by the ban. But that’s going to be a tough case to prove, considering that ZTE’s disappearance would make barely a ripple on the global commerce scene. The hole they leave in the smartphone industry will be immediately filled by other smartphone makers ranging from Samsung to Nokia, and the networking and carrier business would likely be taken over by China’s Huawei.