Up until last month, ZTE was the fourth-largest smartphone vendor in the United States. This month, it is shutting down its entire global operations. This is because last month, the United States Department of Commerce announced a seven-year ban on ZTE from ordering parts from Amercian companies.
While most smartphone components are produced in China, they are primarily designed by American companies. The ban meant that ZTE would not be able to source components from the likes of Qualcomm and Dolby for its smartphones.
The decision was made by the Department of Commerce after ZTE pled guilty in 2017 to conspiring to violate U.S. sanctions wherein it was selling parts acquired from American companies to North Korea and Iran.
The after effects of this decision are now being visible as ZTE has ceased its global operations. The company’s smartphones are already out of stock on China’s Tmall, while carriers around the world have removed ZTE phones from their stores. The company is trying to convince the U.S. department to reverse their decision on the ban or modify it in any way possible, but given how strongly Trump’s administration has come down on Chinese companies, the chances of this happening are bleak.
“As a result of the denial order, the major operating activities of the company have ceased,” ZTE said in a filing to the exchange. “The company and related parties are actively communicating with the relevant U.S. government departments in order to facilitate the modification or reversal of the denial order by the U.S. government and forge a positive outcome in the development of the matters.”
ZTE’s only hope now is that the Chinese government interferes and convinces the U.S. government to change their decision. However, given the rising tension between the Chinese and the U.S. government that seems unlikely to happen.