ZTE Gets a Reprieve: US Suspends Tech Ban In Exchange For Record Fines & US Oversightby Ryan Smith on June 7, 2018 6:30 PM EST
Back in April, as punishment for continued violations of a previous export ban settlement with the US, the US Department of Commerce’s Bureau of Industry and Security enacted a denial order against ZTE. The order effectively cut off the company off from receiving most US technology, and as a result of this ban, ZTE’s operations, which heavily relied on importing both hardware and software from the US, ground to a halt, putting the future of the company in doubt. However ZTE’s immediate woes now appear to be coming to an end; the Bureau of Industry and Security and ZTE have come to an agreement that will see the US tech ban suspended in return for a massive settlement, leadership changes, and allowing significant & ongoing US oversight of the company’s compliance.
Under the terms of the settlement, ZTE is paying an immediate $1B fine, on top of the existing $892M in fines they’ve already paid related to their misconduct in this case. Furthermore the company will have to completely clean house on its executive team and board of directors, replacing all of the members in both of those groups. Meanwhile to ensure ongoing compliance, ZTE is being required to put a further $400M in escrow, which would be forfeit if they violated US export regulations again. And the company will be required to host and pay for a US-selected compliance team that will oversee the company’s compliance over the term of the agreement.
In return, the US will be suspending – but not removing – the US technology export ban that has caused the company to grind to a halt to begin with. This would allow the US to quickly re-instate the ban if ZTE violates the terms of the 10 year agreement. Overall this an unprecedented agreement with the BIS in both the size of the fines and the overall scope of the compliance monitoring.
The immediate ramifications of this deal are that although ZTE is becoming cash-poorer, this will allow them to resume day-to-day business operations and get the business moving again. This includes once again being able to receive Qualcomm SoCs and the Android OS for their smartphones, along with the numerous components used in their networking gear.
There are also some political ramifications to this deal – which are outside the scope of AnandTech’s purview – but as the New York Times notes, many see this as part of a larger peace offering in ensuring a new trade deal between the US and China.
Source: US Department of Commerce