INSUBCONTINENT EXCLUSIVE:
Chinese phone maker ZTE is seeking a much-needed stay of execution in its so-called 'death sentence', and it just may get that reprieve from
US President Donald Trump."Everything ZTE is doing right now is designed to get the denial order rescinded, modified, or suspended," said
people familiar with the situation to TheIndianSubcontinent.That may be working, as President Trump tweeted some good news for the company
on Sunday: "President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business,
fast."Trump finished by saying, "Too many jobs in China lost
Commerce Department has been instructed to get it done!"What happened with ZTE in the first placeZTE, the No
4 smartphone manufacturer in the US, was blocked from importing and licensing American technology and services by the US Department of
This ban stems from the fact that, in 2017, the Chinese company pleaded guilty to illegally and deceptively shipping devices, ones
containing US-made components, to a sanctioned Iran and North Korea, under a prior CEO.Under the terms of its plea deal with the US
government, ZTE paid a fine of $1.19 billion (about £876m, AU$1.6b), had to fire four senior employees and was supposed to discipline or
reduce bonuses to 35 other employees
It didn't do that last part completely, according to the US government, even though ZTE originally stated it had done so in a compliance
letter.The US Commerce Department saw this as another systematic cover-up by ZTE, but the people we spoke described the new denial order as
"grossly disportioncate to the progress ZTE made to build out its export compliance program."ZTE is said to have spent more than $50 million
(about £37m, AU$66m) to build out its export compliance program, going as far as designing next-generation robotically automated compliance
None of this is mentioned in the US government's denial order, however.ZTE's defense and why Trump may make a dealZTE's defense is that it
has demonstrated a culture of compliance since last year's settlement with the US government, and last month's ban stems from a human
resources failure at ZTE – not more orchestrated deception – with clear evidence that HR was in fact instructed to make the necessary
employee bonus reductions.Calling it a "process failure" at ZTE, our sources indicate that it's one that was "self-identified,
self-reported within days of its discovery, and self-corrected very quickly after that." A seven-year ban, essentially a corporate death
sentence, seems excessive.But an even better defense, alluded to by Trump today, is how many jobs are on the line with this ban
Trump cited jobs at risk in China, and ZTE does have over 70,000 employees worldwide
But he could just have easily talked up saving jobs in the US by overturning ZTE's 'death sentence'.ZTE uses components and software from
several US companies, and American consumers and allied governments are at risk without software updates."Millions of US consumers, hundreds
of US suppliers, and allies around the world are affected by this," said people familiar with the impact of the commerce ban
"ZTE supports thousands of high-tech jobs around the United States."In 2017, ZTE procured $2.3 billion (about £1.7b, AU$3b) of goods,
software and technology spread out of over 200 US suppliers
Its biggest suppliers, of which ZTE spent $100 million on each in the last year, include Qualcomm, Broadcom, Intel, Texas Instruments,
Xilinx, Akasha Communications and SanDisk.Qualcomm may lose $500 million if the denial order were to stay in place, but talking to people
familiar with these firms, a company like Akasha Communication is more at risk. "Akasha may not be as big of a name
It's actually a smaller company that's probably been hit hardest in many ways by what's happened," we were told by these people
"They only have about 350 employees, but since the denial order has come out, their stock has dropped 35% in a single day and has remained
pretty depressed."US allies and you, the consumerSaving jobs in both hemispheres may play a huge part in lifting the ban on ZTE
But the needs of individual American consumers and key US allies are also at hand. "ZTE is not able to obtain routine software updates,
service and security patches for its devices," said a person familiar with the ban repercussions
"Google simply cannot send ZTE this, as they try to comply with the denial order."The overall replacement cost to ZTE-device-owning
consumers is enormous, as an estimated 30 million US consumers own ZTE products
The company has routinely been a part of TheIndianSubcontinent's best cheap phones in the US, and these budget handsets sell even better
than its flagship products, like the ZTE Axon 7 and Axon M
Budget phones are how it has climbed to No
4 among US smartphone makers.More broadly, implications of the ZTE ban are entangling US allies, including key NATO countries, where the
company has more infrastructure in place than it does in the US
ZTE has deployed over 600 communication networks to 100 countries, including about over one hundred 3G/4G wireless networks in more 50
countries.Its biggest deployments are in India, where its networks support 100 million users and Indonesia where it supports 30 million
Italy and Austria, two NATO allies of the United States, are supported by ZTE's cellular network infrastructure, too, with 29 million and
3.7 million users, respectively."It's essentially half of the population of Austria," said our sources, noting that ZTE supports almost the
entire network for the country's core operator there
"If ZTE isn't able to service, repair, provide upgrades to software, and fix bugs because the software or equipment is subject to [the ban],
there's a risk that the network could crash and Austria could risk losing access to their cellular network."There's a lot at stakeZTE has
had to suspended its production lines because its devices depend so heavily on US equipment and software
Although US stores with ZTE devices have been able to continue to sell ZTE-made products in their current inventory, ZTE can't continue to
manufacturer or develop additional devices.In fact, the language of the denial order mentions that ZTE can't move, transport, or destroy the
US-made components it has on hand
It technically can't even store the equipment, either, so it's become impossible to comply with."If ZTE doesn't have a resolution sooner
than even a new administration, assuming its a one-term administration, it's unlikely that the company could continue operate that long and
resemble anything like it does now.""It would be very difficult for ZTE to operate as a company, the size that they are, if it can't get the
ban lifted in the very near term."On the flip side, ZTE's troubles could signal that operating in the US has the potential to become a
minefield for Chinese companies
It may hasten the growth of sourcing chips from foreign firms like MediaTek or developing in-house chip solutions instead of from Qualcomm
or Intel, and spur alternatives to Google's Android and mapping software
This is something that the Trump administration doesn't want either.ZTE going forwardLast month, ZTE appeared to have been the first telecom
casualty of the US-China trade war
It also now faces uphill battles in the UK over the sale of its networking equipment
Huawei, the other Chinese phone maker under fire in the US, is also finding little love from American carriers and stores, though it's still
able to be sold elsewhere in the world
But, today, the work-in-progress relations between China's President Xi and US President Trump appears to be ZTE's best hope to stay
alive.President Xi is said to have played a key role in bringing North Korea to the table with the US and South Korea, and to give up its
nuclear ambitions (North Korean leader Kim Jong Un recently made his first two trips outside of his country as a leader, and they were both
to visit Xi).So while ZTE may have been the first US-China trade war casualty last month, this month, it may be among the first
beneficiaries of Washington's more harmonious relations with North Korea, care of China's influence in the region.ZTE's 2018 plans, before
last month's ban, were said to include further developing a foldable smartphone sequel and launching the ZTE Axon 9
While we can't be sure how the ban has impacted the devices, both are likely to require sourcing components from Qualcomm and other US
companies that ZTE has spent $2.3 billion (about £1.7b, AU$3b) on in the last year.e8QP9wyF6Uw74WSTyqEXH.jpg#
