ZTE Is Banned From Purchasing Components Made By US Suppliers

Optical Stocks Under Pressure After US Bans Sales To ZTE

It resulted in the U.S. government's decision to ban American companies from selling or exporting any sensitive components to ZTE for seven years. The Chinese gear maker pleaded guilty past year in federal court in Texas for conspiring to violate USA sanctions to Iran. ZTE has been buying the hardware from the U.S. companies and using in its products which are later shipped to Iran and North Korea. ZTE agreed to a criminal and civil fine of $1.19 billion in 2017, and in addition to this, said it would fire four of its executives and either reprimand or cut back bonuses of 35 other workers.

But instead of punishing those involved, "ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand", the Commerce Department said in a statement. A seven-year ban would effectively cover a critical period during which the world's telecoms carriers and suppliers are developing and rolling out fifth-generation wireless technology.

In the Denial Order, Acting Assistant Secretary of Commerce for Export Enforcement Richard Majauskas stated that the level of deception on the part of ZTE was significant.

According to the press release, this denial order against ZTE is a regulatory action and has nothing to do with the ongoing trade war between the U.S.A and China.

The US Department of Commerce has told US companies not to sell components to Chinese firm ZTE.

The immediate action by the Commerce Department are in response to ZTE's apparent lies about its agreement to punish employees who were instrumental in violating sanctions by business with Iran and North Korea.

ZTE faces tough options in particular due to the ban on buying Qualcomm's processors and modems, the main components in smartphones.

The restrictions ban United States companies from selling hardware and equipment to China's ZTE. It said the Shenzhen-based company has cooperated with hundreds of USA companies and contributed to the country's job creation.

The ban on supplying ZTE comes two months after two Republican Senators introduced legislation to block the USA government from buying or leasing telecommunications equipment from ZTE or its Chinese rival Huawei Technologies Co Ltd [HWT.UL], citing concern the companies would use their access to spy on US officials.

The suspension followed security watchdog National Cyber Security Centre (NCSC) warning telecoms companies in the United Kingdom about the long term threat ZTE pose to the infrastructure of these companies.

The ban had been put in place in response to ZTE's violation of trade sanctions on Iran and North Korea, the U.S. said. The rationale behind these decisions hasn't always been clear, but a new set of sanctions aimed at ZTE does have a public rationale behind it.

ZTE pleaded guilty to conspiring to unlawfully export, obstruction of justice and making a false statement. Ciena competes with ZTE in the global market.

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