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United States bans sales to Chinese phone-maker ZTE

United States bans sales to Chinese phone-maker ZTE

ZTE also sells handset devices to U.S. mobile carriers.

The UK's National Cyber Security Centre (NCSC) warned Monday the UK telecommunications sector against using Chinese state-owned Zhongxing Telecommunications Equipment (ZTE) company's equipment and services, citing security risks.

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The detail is that ZTE did not comply with a part of this agreement.

An export ban means U.S. component makers will be banned from selling to ZTE, which regularly buys handset chipsets from Qualcomm, and optical components from such companies as Maynard, Acacia, Oclaro and Lumentum, Jefferies equities analyst Edison Lee wrote in a report titled "All hell breaks loose".

The US Commerce Department said that ZTE lied to American officials about punishing employees who violated US sanctions against North Korea and Iran.

ZTE paid $890m in fines and penalties, with an additional penalty of $300m that could yet be imposed.

As part of the agreement, ZTE pledged to fire four senior executives and apply sanctions to another 35 employees for participating in these "illegal" actions.

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To make matters worse, the U.S. department found that ZTE also lied about its actions and provided "false statements to the (country's) government" after they had been caught on put on its Entity List.

ZTE will probably miss shipments and lose orders on handsets and transmission equipment as a U.S. export ban leads to a lack of components for China's largest-listed telecommunications equipment manufacturer, analysts said. Instead of reprimanding the employees, the company is stated to have rewarded them with full bonuses. "This egregious behaviour can not be ignored".

The restrictions ban USA companies from selling hardware and equipment to China's ZTE.

Either way the Chinese companies are making headway, with Huawei for example emerging as the world's third largest smartphone maker by volume.

ZTE said in a brief statement Tuesday that it is aware of the United States ban.

To alleviate concerns Huawei has even considered a plan to build a state-funded 5G network in the U.S., according to the Financial Times.

Dr Levy also made reference to another Chinese telecoms company, Huawei, in a letter that he sent to United Kingdom telecoms companies, the Financial Times reported. Adding in equipment and services from another Chinese supplier would "render our existing mitigations ineffective".

It appears as if GCHQ does not have the resources to monitor the equipment of two Chinese firms in its critical infrastructure. Officials believe one way to manage the risks posed is to have non-Chinese equipment installed alongside the Chinese-made gear.

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