Chairman tells staff to stay calm after US slaps crippling ban on ZTE

ZTE can’t buy from American companies, which reportedly provide up to 30% of its components

ZTE

Xinmei Shen

Published: 9:00pm, 17 Apr 2018

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This article originally appeared on ABACUS

ZTE’s chairman is urging employees to remain calm -- after the US government banned American companies from selling it any hardware or software for seven years, potentially crippling its smartphone business in its biggest market.

Chairman Yin Yimin told staff that ZTE was taking the ban very seriously, according to an internal memo seen by the South China Morning Post. Yin asked employees to work together and not to panic. “I’d like to appeal all employees to maintain a state of calm, to man one’s post and do one’s job well,” says the memo.

ZTE may be a Chinese company, but its products contain a lot of American technology. Reuters estimates that 30% of ZTE’s components come from the United States, including Snapdragon CPUs from Qualcomm.

And it isn’t just physical parts: The ban extends to software, too. Android itself is open-source, so ZTE can continue to use the operating system -- but the same may not be true of Google’s Android apps, which require an agreement between the American company and the Chinese handset maker.

If covered by the ban, it would mean no Google Maps, no Gmail, and no Google Play Store -- some of the biggest apps in the world, all missing from ZTE’s handsets.

The US is ZTE’s most important market. It’s the fourth-biggest smartphone maker in the country, focusing on cheaper handsets.

And that’s where consumers might see an impact. IDC’s Kiranjeet Kaur told us that US consumers will have fewer options on the low end of the market for cheaper smartphones. She said other companies will step up to fill the gap -- but ZTE will have a much harder time finding replacements for American parts.

“The chances of ZTE being able to find alternative component suppliers and still be able to sell in the US look bleak to me,” says Kaur.

Despite the ban coming at a time of high tension between the US and China, officials insisted it had nothing to do with a trade war and was instead based on a separate investigation into the illegal sale of equipment to Iran. They say ZTE is being punished for giving bonuses to employees involved in those deals, failing to punish them, and lying to US officials about it.

And it’s not the first time ZTE found itself under fire from Western countries. Just a day earlier, a cybersecurity watchdog in the UK warned the country’s telecom industry to not use ZTE products, citing security holes -- but they didn’t specify what they were.

China’s commerce ministry responded by saying they’re prepared to take whatever action is necessary to protect the interests of their companies.

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