China ZTE Corp, one of the world's largest telecommunications equipment makers has to comply with the United States export restrictions after the company allegedly re-exported the controlled items to Iran.
In an announcement by U.S. Commerce Department on Monday, the department mentioned ZTE documents that showed they planned to acquire U.S. products through shell companies, Reuters reports. The decision will take effect on Tuesday. However, ZTE could still make an appeal. Prior to the notice, Chinese officials reportedly expressed their plan to retaliate over the U.S. move. Under the new rule, ZTE suppliers must apply for must seek for a license first to send U.S.-made parts or equipment to the company.
"It's possibly the toughest punishment you can do to a tech company," said the unnamed source, who wished to keep the identity.
With U.S. Commerce Department's announcement, ZTE's extensive market could be vastly affected. It could disrupt worldwide supply chain and bring significant shortages of parts. As per Euronews, it would not be enough for ZTE to meet the demands in the aggressive global tech industry. The company's purchases in the previous year could lead to scarcity of parts. The insider also claimed that U.S. export restriction is hardly given to a company. It is also alarming because if the restriction will not be resolved immediately, it could result to political rift between nations.
"It is going to have a large ripple effect. It's very significant to many companies both in the U.S. and [outside the] U.S.," said Doug Jacobson, an export attorney at law firm Jacobson Burton Kelley PLLC, over the news of the impending export restrictions.
Some experts said that suppliers using American-made parts would possibly stop its transactions with ZTE, Yahoo reported. If a Taiwanese chipmaker is utilizing an American component for making chips for XTE, they would likely encounter a problem. They need to apply first for an export license. However, if the Taiwanese supplier would not use any U.S. parts, their business with ZTE would not be affected.
ZTE is the fourth biggest smartphone company in the United States following Apple, Samsung and LG. It has an annual sales of more than $15 billion and is the sole Chinese smartphone company that has a sprawling presence in the U.S. Given these figures, ZTE could still appeal on U.S. export restriction.
