The U.S. ban comes after ZTE failed to adhere to an agreement made with the government after it pleaded guilty past year to illegally shipping goods to Iran and North Korea and paid $1.19 billion million in fines.
ZTE, the China-based hardware and smartphone maker, has been banned from procuring electronic components from American suppliers by the US Department of Commerce. "So the Chinese government is overly concerned about US sanctions against ZTE".
In March, ZTE admitted that while it had fired four senior employees, it had not disciplined or reduced bonuses to 35 others.
"NCSC assess that the national security risks arising from the use of ZTE equipment or services in the context of the existing United Kingdom telecommunications infrastructure can not be mitigated".
"This will be devastating to the company, given their reliance on US products and software", Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, said of the ban on supplying the company.
The Chinese company paid $890 million in fines and penalties after it pleaded guilty past year to conspiring to violate US sanctions by illegally shipping USA goods to Iran.
It is playing to concerns that the continuing trade tension between the U.S. and China could turn into a full-blown trade war, which would be damaging to the U.S. economy.
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The Department of Commerce has now determined that ZTE has breached the settlement agreement by giving false statements and failing to enact disciplinary actions to parties originally identified as responsible for engaging in the illegal conduct.
The company has set up a crisis management group in response to the ban, said a ZTE source, declining to be identified as the information was confidential.
Similar sentiments were offered by U.S. Republican representative Robert Pittenger, who told Reuters, "China does not play by our rules, and we must be vigilant against Chinese threats to both our economic security and national security".
ZTE's smartphones use microchips from Qualcomm and glass from Corning. In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR). ZTE has purchased chips from Qualcomm Inc.
The NCSC said it would be "impossible" to manage risks to the telecommunications sector if ZTE equipment was deployed at scale and that using ZTE equipment and services would have a "long term negative effect" on the security of the UK.
ZTE's main business is networking equipment where they are a major player alongside other mentionable companies such as Nokia, Ericsson, Huawei and Cisco. ZTE may have to either buy from a competitor or get chips from a Taiwanese company whose products generally lag those of its US rival's in performance.