U.S. companies could soon be cleared to do business with China's ZTE, according to Reuters. China's second largest telecom equipment maker (after Huawei) has reportedly signed an agreement that would lift the U.S. Commerce Department's ban.
Commerce Secretary Wilbur Ross banned U.S. companies from doing business with ZTE in April, after his agency learned that ZTE had not followed through on commitments made back in 2016. At that time, the U.S. discovered documents that showed how ZTE established new entities to sell U.S. technologies to Iran. These were chips and components made in America that ZTE uses to make its radio equipment. The U.S. threatened sanctions, but ZTE promised to change its practices and punish the executives responsible for its misconduct. This year, the Commerce Department learned that several of those executives received bonuses and remained at ZTE, and that discovery prompted the export ban.
Following the Commerce Department's decision, ZTE announced that it had suspended major operations. The company relies on U.S.-made components for many of its products, and also sells many of those products to U.S. customers. Gogo Wireless was one of the first U.S. companies to speak publicly about the potential impact of the ZTE ban.
Last month, President Trump said he was prepared to rescind the ZTE export ban. Published reports suggested that the ZTE ban had become a bargaining chip in the Trump Administration's trade negotiations with China. Specifically, Bloomberg reported that the U.S. might lift the export ban if Chinese regulators approve Qualcomm's $43 billion bid for NXP.
Now, ZTE has reportedly signed an agreement with the U.S., but apparently the Commerce Department has not yet signed. The deal reportedly calls for ZTE to pay $1.4 billion in additional penalties, on top of $361 million already paid. The agreement is also expected to call for other concessions from ZTE, including new board members and increased U.S. oversight of its business.
Congress has threatened to try to stop the Trump Administration from signing an agreement with ZTE. Senate Minority Leader Chuck Schumer told Reuters he thought Congress should immediately take action to try to block the deal.
Several U.S. chipmakers, including Qualcomm and Intel, count ZTE as a customer. Smaller makers of optical components, including Oclaro and Acacia, rely more heavily on ZTE's business.
Over the years, ZTE has worked hard to establish a presence in the United States. The company has 20 U.S. offices or research centers and has sponsored five NBA teams.