It’s part of a bigger sanction against the company
Chinese brand ZTE has been hit by a major setback, as the US Department of Commerce has ruled that it can’t buy Qualcomm chips anymore. It’s part of the bigger punishment that’s been levied against the Chinese company, which came from violating the terms of a sanctions violation case. Qualcomm isn’t the only US-based company the company that ZTE can’t do business with: the terms of the sanctions forbid any US-based company from dealing with them. The ban will be in place for 7 years.
Last year ZTE pleaded guilty to conspiring to violate US sanctions placed by the US against Iran by shipping US-made goods and technology to the middle-east nation. Part of the terms of the settlement of the case with the US was that the company would fire 4 senior employees and discipline 35 others. While the 4 senior employees were sacked, the other 35 has not been disciplined.
The decision against the company will negatively impact ZTE’s bottomline, as at least 25% to 30% of the components ZTE uses in its products are sourced from American companies. Production will be affected as ZTE scrambles to find non-American analogs of the components of their products.