Washington has restricted the access of one of China's biggest telecoms equipment makers, ZTE Corp., to American components after concluding the state-owned company improperly exported U.S. technology to Iran. The sanctions took effect yesterday after ZTE was found to be "acting contrary to the national security or foreign policy interests" of the United States, the U.S. Commerce Department said. The department released documents it said showed ZTE set up front companies to evade U.S. controls on high-tech exports to Iran. The Chinese government said it opposes the U.S. sanctions. ZTE's technology purchases support thousands of U.S. jobs that might be in jeopardy, the Commerce Ministry said.
"This approach will only hurt others without necessarily benefiting oneself," said China's foreign minister, Wang Yi, at a news conference Tuesday during the meeting of the national legislature. ZTE said it was "fully committed" to obeying the law wherever it operates. The conflict reflects the complex ties between U.S. and Chinese technology companies despite Washington's concerns about sharing advanced know-how with China.
Most of the world's smartphones and personal computers are assembled in China. ZTE and other Chinese companies are developing their own technology but rely on Western chipsets and other components. The sanctions could prompt Chinese leaders to push for faster development of their own fledgling technology suppliers, said Nikhil Batra, research manager for Asia-Pacific telecoms for IDC.
"It might be a boon" to officials who want to reduce reliance on foreign sources, said Batra. "It's not likely to be their chief concern that one of their companies has been sanctioned when it can lead to better development of China as a technology marketplace," he said.
American companies also might be vulnerable to retaliation, Batra said. He noted Beijing fined American chip supplier Qualcomm Technologies Inc. and investigated software giant Microsoft Corp. on anti-monopoly charges after Huawei Technologies Ltd. was forced out of the U.S. server market following complaints it might be a security risk.
Founded in 1985 as Zhongxing Semiconductor Co. Ltd., ZTE is a major supplier of network switching gear and other telecoms products. It assembles smartphones for other companies and has launched its own brand.
ZTE and three other entities, including one in Iran, "were identified in the scheme developed by ZTE Corp. to re-export controlled items to Iran contrary to United States law," said a Commerce Department announcement. It said they will face additional requirements to apply for export licenses and gave no indication whether they would be granted.