Smartphone maker ZTE has announced that it’s ceasing “major” operations, revealing itself to be, perhaps, the first victim of a new trade-based cold war.
The news comes about a month after the Trump administration banned U.S. companies from supplying ZTE with components or technology until 2025.
The U.S. Department of Commerce instituted the ban after the Chinese OEM was found to have been violating trade restrictions by illegally shipping U.S. products to Iran, CNBC reported.
The Chinese manufacturer pleaded guilty in a Texas federal court last month to conspiring to violate U.S. sanctions on countries such as North North and Iran.
Now, ZTE faces a “death sentence.” Since manufacturing has halted at the firm’s plants, plant workers have been called in for training every couple days, the New York Times reported. Other employees are being instructed to reassure clients and avoid discussing the details of the tech it’s been cut off from.
American components and technology are critical to the firm’s devices. Google makes the Android operating system they run on, while various U.S. manufacturers supplied the firm with chips, optical hardware, and other important components.
In the wake of the ban’s announcement last month, those U.S. suppliers were also impacted. Shares of some of ZTE’s major American suppliers plummeted as much as 34 percent, Reuters reported in April.
ZTE, along with Huawei, has also been the target of U.S. government concerns about espionage and spying. But unlike Huawei, ZTE has managed to gain ground in the U.S. market.
It released its first handset in the U.S. in 2011 and it’s currently No. 4 smartphone maker in the country by market share. While its looming demise may bode well for its rivals, it also takes another key player out of the market — further consolidating the industry.
More than that, ZTE’s other network products form the telecom backbone for large portions of the developing world. Its collapse may have a ripple effect with far-reaching implications for various carriers and firms who use ZTE’s network gear, the NYT reported.
The Chinese manufacturer is actively trying to renegotiate the ban, communicating with U.S. lawmakers to have it have it lifted or modified. For its part, it said it will work to improve its “compliance practices” with trade sanctions.
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