The U.S. Commerce Department will place export restrictions on ZTE this week, according to a Reuters report, for allegedly violating U.S. export controls on Iran. The restrictions, which will take effect tomorrow, will require the Chinese manufacturer's suppliers to apply for an export license before shipping any U.S.-made equipment or parts to ZTE.
Those license applications "generally will be denied," Reuters reported.
Bloomberg reported that ZTE relies on U.S. companies for 43 percent of the components and services it sells, and the top U.S. exporters to ZTE include Avnet, Qualcomm, Broadcom and Intel. With ZTE depending heavily on major U.S. suppliers for vital parts, any U.S. restrictions are sure to cause supply problems that will slow the company's growth. But those restrictions will also likely have a negative impact on American companies such as Qualcomm, Broadcom and Intel.
ZTE has quietly gained traction in the U.S. and in September became the fourth-largest smartphone vendor in the American market. The company recently said it expected to report a 43.5 percent increase in full-year net profit for 2015.
This isn't the first time ZTE has faced export issues. The Commerce Department investigated ZTE for alleged export-control violations in 2012 following reports the company had inked deals to ship hardware and software from American tech businesses to Telecommunication Co of Iran (TCI), that country's largest telecom operator. ZTE's U.S. partners at the time included Microsoft, IBM and Oracle, although they said they weren't aware of possible ZTE contracts with TCI.
ZTE this week said in a statement to Reuters that it "is highly concerned about recent media reports relating to a U.S. Department of Commerce investigation…. ZTE has been working with associated U.S. government departments on investigations since 2012 and maintains constant communication with associated departments and is committed to fully address and resolve any concerns."
- see this Reuters report
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