The future of ZTE as an Android phone maker is in flux at the moment, with the company facing a ban on purchasing components from US companies after they admitted to violating sanctions against both Iran and North Korea.
The ban on ZTE being able to purchase goods from US manufacturers for 7 years is coupled with a criminal fine and forfeiture totalling approximately $1.19 billion USD, was outlined in a US Department of Commerce order. The ban affects ZTE’s ability to purchase goods from US manufacturers including Intel, Qualcomm and possibly even the free Android operating system.
The ban and fine was put in place after a 5-year investigation found that ZTE had circumvented embargoes on shipping US-made components into both Iran and North Korea using a series of shell companies. According to reports, ZTE has plead guilty to circumventing the embargoes, and as a result they will be banned from purchasing components from US manufacturers for 7 years.
The wording of the ban states that ZTE cannot ‘participate in any way in any transaction involving any commodity, software or technology… exported or to be exported from the United States.’ which would technically include the ability to license Android from Google, a US-company.
According to a report from Bloomberg, ‘ZTE lawyers have been meeting with Google officials about the issue, according to the person. They asked not to be identified talking about private discussions. Google and ZTE declined to comment’.
ZTE has a lot of business invested in Android both in their Blade and Axon series phones, as well as their white-label business creating branded phones for companies including Telstra and Boost Mobile in Australia.
ZTE could conceivably do a lot with other component makers including Mediatek in terms of processors for their mobile division, however the loss of a license to use Android could be catastrophic. Very few mobile OS options exist these days with Microsoft killing off Windows Mobile, iOS is of course a closed system, WebOS is now a SmartTV platform, Firefox OS is now dead and Samsung’s Tizen mobile OS has gained very little traction.
In terms of business, trading in ZTE shares was suspended in Hong Kong soon after the announcement of the ban yesterday.
We’ve reached out to ZTE Australia regarding the issues and future of ZTE devices but haven’t heard anything back at this stage.
