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Home / Tips and Tricks / What you need to know about ZTE's ongoing struggle with the US government: Smartphones :: Gadget Hacks

What you need to know about ZTE's ongoing struggle with the US government: Smartphones :: Gadget Hacks



| Update: ZTE's problems with the US government are finally solved. Look at the details below.

ZTE has a history of shaking his head with the US government. Several agencies have expressed mistrust with the Chinese company and even prevented Americans from using their products. With the recent event in this ongoing battle, it looks like Americans should finally ignore the OEM.

When the news came that FBI, CIA and NSA were all against the use of ZTE phones, many thought this was just another example of government overreacting without really understanding technology. Maybe that's it, but after a recent court ruling, ZTE phones sold in the US will be severely handicapped anyway. There's a lot going on here, so I'm starting to give some context.

A short story about ZTE's fight with the US

ZTE has been fighting with the US government for several years. The House Intelligence Committee concluded in 2012, after a year-long investigation, that Huawei and ZTE were a threat to national security for American companies. As a result, a financing law was enacted the following year, requiring NASA, the Department of Justice, and the Department of Commerce to seek the approval of federal agencies before purchasing IT systems from these companies.

In 2011, the FBI opened a criminal investigation into ZTE for illegally shipping US $ 16,000 worth of tech goods to Iran. ZTE was convicted and had to pay $ 890 million in fines and penalties for an additional $ 300 million over seven years if it failed to meet the requirements of the agreement. Under the Disciplinary Agreement, ZTE was forced to lay off four senior executives and discipline another 35. The US also required US companies to apply for export licenses prior to shipping US products to ZTE.

ZTE met the restrictions and was removed from the trade blacklist in 2017, allowing ZTE to compete again in the US.

Recent Litigation of ZTE in the US

In early 2018, rumors surfaced that ZTE would return to the US market with a successor to the popular ZTE Axon 7. While rumors were meager, Leaks hinted that a Qualcomm Snapdragon 845 Chipset would lead customers to believe that ZTE again offered a flagship device. However, this changed with the latest news.

In April 2018, US officials learned that ZTE had dismissed the four executives following the 2011 verdict, but had not disciplined the 35 additional employees. As such, they were violating the agreement, and the US Department of Commerce reacted violently – banning US companies to sell technology products to ZTE for seven years.

Therefore, US technology companies such as Qualcomm will not be able to sell to ZTE until 2025 .

What this means for US consumers

ZTE is unlikely to sell cell phones in the US over the next seven years. Without Qualcomm, ZTE can only buy CPUs from Samsung, Huawei or MediaTek. However, Qualcomm owns several key patents for the CDMA-based mobile networks used in the US, making it nearly impossible to launch a phone without purchasing some Qualcomm technologies.

Even if ZTE could bypass this problem, Samsung will likely follow the leadership of the US government and avoid any issues that might arise from its involvement in ZTE. In addition, Huawei has to contend with its own plethora of problems as [6] recommended important US intelligence agencies against the use of their products . This leaves ZTE with only one option for a processor: MediaTek. The Taiwanese-based company is not well established in the US, as its chipsets are usually found only in entry-level devices. While they have some flagship processors, they have shifted their attention away from them as they have been largely ignored by OEMs. In general, MediaTek processors are less powerful than Huawei's Kirin and Qualcomm's Snapdragon and use weaker GPUs and less powerful modems.

Apart from that, the recommendation of US intelligence should not be ignored. On two separate occasions, the US government has strongly recommended doing business with ZTE and Huawei, with the second recommendation being from six intelligence services. ZTE has also deceived the US government by selling US products to a known adversary. Both recommendations were based on national security risks, the latter citing the "ability to maliciously modify or steal information".

It's getting worse

It looks like ZTE's problems just got worse. As the US Department of Commerce ban also includes software, ZTE could also lose access to Google's Android operating system . Alphabet (Google's parent company) and ZTE are meeting to discuss the ban, which could include Android.

Because Android is open source, it could be exempted from the ban. Because Google (an American company) creates apps for the platform (such as the Play Store), future ZTE devices may not be allowed to install Google Apps on their device. These include Gmail, Google Maps, YouTube, the Play Store and many more.

An intervention by the president?

Now, ZTE actually seems to be rescued by an unusual hero – the Trump administration. A tweet from Donald Trump stated that he is working with President Xi of China to correct the ban, which not only damages their presence in America, but could also create jobs for the company.

The reason for this sudden change could be due to damage that each country is causing as a result of the current US-China trade war. It is rumored that the deal eliminates the billions of dollars that China is placing on US agricultural products. In addition, the two countries are negotiating the easing of the barriers created by China, which prevent the US company Qualcomm from taking over NXP Semiconductors from the Netherlands.

The acquisition, first announced in October 2016, received eight of the nine required antitrust approvals Finalize the purchase. It just needs one more permit: China. Therefore, the future of ZTE and Qualcomm are intertwined in these negotiations in more ways than one.

According to Hill, on May 17 the House Appropriations Committee unanimously approved an amendment to the Law on Trade, Justice and Science for 2019. According to Rep. Dutch Ruppersberge (D-Maryland), the Department of Commerce would prevent the renegotiations from being renegotiated. With this agreement, any relief tweeted by President Trump is dead. For the time being, ZTE must serve its seven-year ban. However, the ZTE Axon 9 may not be dead.

A potential lifeline from a competitor

It looks like ZTE may not be dead yet. While Qualcomm should be legally prohibited from selling its product to ZTE, the Chinese company could possibly use another SoC: Samsung's Exynos Processor

Samsung's chief of logic chip developers Inyup Kang reported Reuters Samsung will unveil a new client in the first half of 2019. Currently, the only other OEM using Samsung's Exynos SoC is Meizu.

With ZTE's ban, however, this could be the lifeline ZTE needs to re-release its phones without the use of American products. Depending on whether Google's Android software is to be included in the ban, ZTE could be ready for use again next year.

Update: Conclusion on the Saga

We have this ongoing struggle between ZTE and the US government. At the behest of President Trump, the Department of Commerce reached a new contract with ZTE, which lifted the ban as long as ZTE met a number of requirements. According to Reuters, ZTE has deposited $ 400 million into a US bank trust account under the agreement, along with a $ 1 billion fine that ZTE had already paid to the US Treasury in June , ZTE also had to replace its board and senior management, which they did.

ZTE will also need to hold a compliance team (as reported by The Verge) for ten years, consisting of individuals selected and responded to by the US government body. This team will monitor the company's actions and assist the US government in introducing a new ten-year ban on infringements.

The ZTE Axon 9 is back on schedule and will be announced at 10:00 am on August 30: 00:00 ET. What do you think about the solution to this problem? Are you happy that ZTE's ban was lifted? Let us know in the comments below.

Do not miss: Here is everything we know about the ZTE Axon 9

Cover image and screenshots of Jon Knight / Gadget Hacks


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