ZTE banned from using US-based hardware or software in its products

A Chinese national flag and two flags bearing the name of ZTE fly outside the ZTE R&D building in Shenzhen China

A Chinese national flag and two flags bearing the name of ZTE fly outside the ZTE R&D building in Shenzhen China. Image Reuters

Third, these reinstated sanctions (denial of export privileges against ZTE) as it relates to the 2015 investigation, according to management, are clearly meant to send a message to Chinese companies doing business with the United States and could be part of a bigger plan in the US government's recent trade war escalation with China.

The U.S. action, first reported by Reuters, could be devastating to ZTE since American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE's equipment, which includes networking gear and smartphones. Acacia Communications Inc. shares fell by 34.7%, a drop influenced by the fact that almost a third of the company's 2017 revenue came from ZTE.

Shares of optical companies including Lumentum Holdings Inc fell 6.6 percent and Finisar Corp dropped 2.7 percent.

"ZTE made false statements to the US Government when they were originally caught and.made false statements during the reprieve it was given, and made false statements again during its probation", Commerce Secretary Wilbur Ross said in a statement. "That was in response to the USA asking for the information". "And in global commerce, truth is pretty important".

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NCSC technical director Dr. Ian Levy wrote a letter addressing concerns to telecoms organisations regarding the use of ZTE equipment and services in the UK.

"This will be devastating to the company, given their reliance on USA products and software", said Douglas Jacobson, an exports control lawyer that represents ZTE suppliers. The company will now be banned from incorporating any commodity, software or technology from United States companies in any of its products.

The news comes after ZTE previous year pled guilty in federal court to subvert USA sanctions in Iran. "It's certainly going to make it very hard for them to produce and will have a potentially significant short and long-term negative impact on the company". As part of the initial agreement, ZTE was allowed to continue to work with US companies, assuming it adhered to the rules laid out in the agreement.

The U.S. action against ZTE is likely to further exacerbate current tensions between Washington and Beijing over trade.

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The company was supposed to take disciplinary action against multiple individuals at ZTE.

The U.S. government had allowed the company continued access to the U.S. market under the 2017 agreement.

From January 2010 to March 2016, the company shipped $32 million in United States cellular network equipment to Iran, and made 283 shipments of cell phones to North Korea, with the full knowledge of the highest levels of company management, officials said.

ZTE misled the Department of Commerce.

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