ZTE joins Huawei in the US government's doghouse

ZTE Z Max Pro

The US government doesn't want American companies to do business with another Chinese phone manufacturer, this time training its ban hammer on ZTE. Like Huawei, ZTE facing new scrutiny today from the US Department of Commerce. 

The maker of the ZTE Axon 7 and Axon M won't be able to get key components and services from US companies it relies on, like Qualcomm, Microsoft and Intel, reports Reuters. It also sells phones through US carriers AT&T, T- Mobile, and Sprint, which may prove problematic from here on out.

What's the reason for the US government's isolation of ZTE? In 2017, the Chinese company pleaded guilty to illegally and deceptively shipping US-made components to a sanctioned Iran and North Korea. Under the terms of the plea deal, it paid a fine of $1.2 billion, fired four senior employees and was supposed to discipline or reduce bonuses to 35 other employees. It allegedly didn't do that last part, according to the US government.

What happens to the ZTE Axon 9

ZTE relies heavily on companies like Qualcomm for their Snapdragon chips. We had expected a ZTE Axon 9 to launch in the US in 2018 with a new Snapdragon 845 chipset.

The smartphone maker's plans for the US launch now sound as if they are in jeopardy due to this export ban. It's estimated that American companies supplied ZTE with 25% to 30% of the components used in ZTE devices, says Reuters. Shares of ZTE took a sharp dive of 34% today.

The UK government's cyber security agency had some bad news for ZTE, too, warning British telecomm companies not to use ZTE services and equipment. On Friday, we reported that ZTE often failed to properly issue security patches to its phones, according to a new study

Huawei has faced similar warnings in the US, enough to get AT&T, Verizon and Best Buy to back away from plans to launch the Huawei P20 and P20 Pro in the US.

We'll update this story if we get an official statement from a so-far-silent ZTE.

Matt Swider