Uh oh, looks like ZTE Corp is in big trouble! The company can’t buy Qualcomm chips anymore, following a decision by the US Department of Commerce. Scroll down to read more!

US bans ZTE from buying Qualcomm chipsets for seven years.

The U.S. Department of Commerce has banned American companies from selling components to Chinese telecom equipment maker ZTE Corp. The reason is that ZTE broke an agreement due to illegally shipping goods to Iran, U.S. officials said on Monday. The ban will be valid for seven years. Last year, ZTE pleaded guilty to violate US sanctions by illegally shipping US goods and technology to Iran. As part of the ensuing settlement, the company promised to fire four senior employees and discipline 35 others. By either reducing their bonuses or reprimanding them.

While ZTE has fired those mentioned employees, it has admitted last month that the company had not disciplined or reduced bonuses for the other 35. And that’s why this ban came to be. Eventually, this Chinese company paid $890 million in fines and penalties. Alongside with an additional impose of $300 million worth. “If the company is not able to resolve it, they may very well be put out of business by this. Many banks and companies even outside the U.S. are not going to make a deal with them.” – Said Eric Hirschhorn, a former U.S. undersecretary of commerce who was heavily involved in the case.

Under terms of the ban, U.S. companies cannot export prohibited goods, such as chipsets, directly to ZTE or via another country. Apparently, this ban has the potential to impact ZTE’s business in a negative way. American companies are estimated to provide 25% to 30% of the components used in its equipment, ranging from networking gear to smartphones.

The devastating consequences

The U.S. action against ZTE is likely to exacerbate current tensions between Washington and Beijing over trade further. After the U.S. placed export restrictions on ZTE in 2016 for Iran sanctions violations, China’s Ministry of Commerce and Foreign Ministry criticised the decision.