Economic issues should not be politicised in order to stifle competition, the official China Daily newspaper said in an editorial on Wednesday after a USA decision to ban American firms from selling parts and software to China's ZTE Corp.
According to IHS-Markit, ZTE shipped 46.4 million smartphones in 2017, about 3 percent of the market and down 20 percent on the previous year.
It could mean the end of ZTE's smartphone business outside of China entirely. On the other hand, Android is an irreplaceable core part of ZTE's devices, and losing it would be a huge deal. "The action targets China, however, it will ultimately undermine the United States itself", Xinhua quoted spokesperson Gao Feng of the Ministry of Commerce as saying.
Previously fined for shipping telecoms equipment to Iran and North Korea and paying full bonuses to employees involved in such illegal activities, ZTE did not reprimand those staffers and repeatedly lied to the USA government about such practices, said Secretary of Commerce Wilbur L. Ross, Jr. Restricted activities include exporting or re-exporting to ZTE Corporation or ZTE Kangxun any hardware, software, or technology subject to the EAR (including US origin items overseas and foreign-made items with more than 25 percent USA content), as well as facilitating acquisition of such items by the ZTE entities, and servicing EAR-controlled items that are owned, possessed or controlled by the ZTE entities.
Although Google's Android operating system - which Huawei and ZTE rely on to power their smartphones - is an open source software, a number of Google's key apps aren't, and neither is access to the Google Play Store.While Huawei appears to have given up on the American mobile market, at least in the short term, the new actions would likely severely damage ZTE's mobile sales in the U.S., where it has achieved a 12 percent market share in just three years, Plouffe added. Trading in its shares has been suspended in China since Tuesday. Reuters also estimated that ZTE relies on U.S. firms for supplying 25%-30% of components it needs for making smartphones and telecoms networks.More news: Procter & Gamble Q3 Core EPS Up 4%; Organic Sales Up 1%
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The ban could be catastrophic for ZTE, the fourth-largest smartphone vendor in the United States, as it is estimated to rely on U.S. firms for almost a third of crucial components such as chips in its products.
During one three-month period past year, Huawei overtook Apple to become the world's second largest smartphone maker, according to figures by Counterpoint Research.
News of the memo was first reported by the South China Morning Post. A number of other chip suppliers will be affected by the ban.
Google declined to comment and ZTE has not responded to requests to comment. The company has spent billions of dollars licensing technology from US partners, he said.