USA bans ZTE: China says the decision will hurt America itself

ZTE responded that it was "assessing the full range of potential implications that this event has on the company and is communicating with relevant parties proactively in order to respond accordingly", the Wall Street Journal reported.

The Chinese are now rallying around the phone company ZTE response to a US ban on sales of components to the Chinese company.

ZTE, a maker of telecommunications equipment and smartphones, was due to release results on Thursday. The Shenzhen-headquartered telecom equipment maker will face a seven year ban on the use of American parts for its hardware.

"The Trump administration's stance against Huawei and ZTE is very much in line with its antagonistic approach to trade policy with China", Michael Plouffe, a lecturer in global political economy at University College London (UCL), told DW.

ZTE said in a statement that its board had postponed a meeting to approve the results, pending an assessment of the impact of the move by the US government. More recently there is debate over whether this includes the free licence for Android, or perhaps more likely whether they could continue to use the open-source Android components but exclude all of Google's services including the Play Store.

ZTE has not responded to requests to describe how it intends to respond to the ban, which a senior U.S. Commerce official told Reuters is unlikely to be lifted.

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Analysts say money is now "raining down" from Beijing and state-backed funds to support the chip market, while the country's state chip fund, known as the "Big Fund", raised an estimated $32 billion in a new round of financing last month. Regardless, it's not looking good for ZTE in the Android world...

ZTE, which has chips from USA firm Qualcomm in an estimated 50-65 percent of its phones, is now facing a struggle to save its smartphone business as it looks to find new supplies.

"The impact on China's 5G program would be that Huawei will be the lead going forward, with Datang Telecom being pushed up to try to fill the void from ZTE". "The action targets China, however, it will ultimately undermine the USA itself", Xinhua quoted spokesperson Gao Feng of the Ministry of Commerce as saying.

If Alphabet does end up deciding to pull ZTE's GMS license (known as the Mobile Application Distribution Agreement, or MADA), that's decidedly worse news than not being able to buy Qualcomm chips.

The ban and fine was put in place after a 5-year investigation found that ZTE had circumvented embargoes on shipping US-made components into both Iran and North Korea using a series of shell companies. Its deal with the USA government included penalties and fines totaling more than a billion dollars, but allowed it to continue doing business with US suppliers.

  • Megan Austin