The Chinese smartphone manufacturer ZTE is facing a new obstacle regarding the US market and its regulations. On Tuesday, US regulators proposed a series of rules that would diminish ZTE sales, as well as a ban on supply that would mean that ZTE can no longer use Android on its devices.
On Monday, the Commerce Department barred US-based companies from supplying ZTE with software and parts for the next seven years. A while ago, it was discovered that the Chinese manufacturer had illegally shipped US goods to Iran. An agreement was reached between the US and ZTE to prevent further such incidents. However, ZTE has violated the agreement, and this latest ban is the direct result of that.
Furthermore, on Tuesday a US regulator proposed a rule that would not allow government programs to buy from firms believed to be a threat to US telecommunications networks. Such firms include ZTE as well as Huawei Technologies.
These latest regulations by the US Commerce Department mean that ZTE’s license for Google’s Android OS might be revoked. Alphabet Inc and ZTE Corp have been in discussions regarding the new rules’ impact, although neither company has made a public statement as of yet.
The proposed rules and regulations are the newest in the line of the increasingly complicated relationship between China and the US, who have already established tariffs amounting to billions of dollars. Experts fear an explicit trade war which could harm supply chains worldwide.
According to market researchers, ZTE is the seventh largest manufacturer of Android devices, having shipped over 46 million smartphones in 2017.
The Federal Communications Commission is also finalizing a series of new rules. These would block money from the FCC’s Universal Service Fund—that amounts to $8.5 billion—from going to firms or countries believed to be a ‘threat to the integrity’ of telecommunication networks.
Ajit Pai, chairman of the FCC, argues that devices from such companies can serve as a backdoor to US networks which would allow hostile bodies to introduce viruses and malware into the systems, as well as to steal US citizens’ private data. Last month, Pai addressed the Congress through a letter, in which he expressed that he also shared the US lawmakers’ concerns about Huawei taking part in espionage.
Telecommunications trade group USTelecom praised the new proposed rules by FCC, saying that they will help in enforcing the integrity, availability, and confidentiality of US networks.
Moreover, Republican senators have put forward a legislation that bars US governmental bodies from leasing or buying telecommunications devices from ZTE or Huawei. These rules appear to be another toolset to prevent the two Chinese companies from acquiring a large market share in the US.
In a reaction to the influx of foul news, Huawei let go, Bill Plummer, VP of external affairs, as well as four employees at their Washington office. Their expenditure for lobbying has also been decreased from $348,000 to $60,000 last year. Similarly, ZTE also decreased theirs to $510,000 in 2017 from $860,000 the previous year.