Technolgy Rules: ZTE says export ban will ‘severely impact’ its survival

Friday, April 20, 2018

ZTE says export ban will ‘severely impact’ its survival

It’s been a hell of a week for ZTE. News Monday that it was being hit with a seven-year export ban sent the company scrambling. The Chinese handset maker suspended its earnings report and reportedly sent its lawyers to meet with Google to see if anything could be worked out about a punishment that could hamper its ability to utilize Android and various key services.

Four days after we first reached out, ZTE has finally offered us an official reaction to the news. And it’s a doozy. The six-paragraph official statement from corporate mulls over the punishment and reasserts ZTE’s compliance to international law, which it “regard[s] as the foundation and bottom-line of the company’s operation.”

ZTE adds that it invested “over $50 million in its export control compliance program and is planning to invest more resources in 2018.” So, why did the company get dinged by the U.S. Department of Commerce for failure to significantly reprimand staff after pleading guilty to violating sanctions on Iran and North Korea?

The company contends that the U.S. Bureau of Industry and Security “ignored” its “diligent work” and progress it has made in complying with the law, calling the punishment, “unfair.” Seven years is certainly severe, given that U.S.-based companies make north of a quarter of the components used in the company’s handsets, according to estimates.

That, coupled with U.S.-based software makers, Google included, put the company in an extremely tight spot moving forward, and will likely require a complete rethink of ZTE’s business model, if upheld.

“The Denial Order will not only severely impact the survival and development of ZTE,” the company says, “but will also cause damages to all partners of ZTE including a large number of U.S. companies.” ZTE adds that it will continue to fight the ruling, taking “judicial measures,” if necessary.

The punishment comes as ZTE finds itself targeted by the U.S. government over spying charges, alongside fellow Chinese handset maker, Huawei.