Create a free Industrial Equipment News account to continue

American Suppliers Banned from Selling to Chinese Phone Maker

And it all comes to down to a few executive bonuses.

ZTE is considered a leading telecom equipment manufacturer, but the China-based company has been busted for doing something so far outside the lines that the U.S. has announced that American companies are banned from selling to ZTE for the next seven years – and it all comes to down to a few executive bonuses.

Last year, ZTE, a major producer of cell phones and other electronics like tablets, projectors and smart watches, pled guilty to illegally shipping goods to Iran, which was in violation of U.S. sanctions. The case contended that ZTE’s managers deliberately conspired to “evade U.S. embargoes by buying U.S. components, incorporating them into ZTE equipment and illegally shipping them to Iran.” The company then enacted cover-ups to avoid being detected until… they were. And fined $890 million.

But the other part of the deal was that ZTE had agreed to fire four executives at the heart of the scheme and hit 35 others with reprimands or reduced bonuses. It was discovered in March, however, that the company actually stopped at the firings – the bonuses for the other 35 remained intact, which drew the ire of the U.S. government, who then dropped the hammer.

An attorney for suppliers to ZTE called the ban “highly unusual” and said it would be devastating for the company to try to market its goods without the benefit of U.S. tech. ZTE won’t be barred from selling in America – and does via partnerships with mobile carries like AT&T and Sprint – but to sell its products without pieces like Qualcomm chips and Intel processors leaves the company’s supply chain in shambles.

But ZTE is not the only company that’s effectively been punished. Reuters reported that optical component makers in the U.S. who supplied products to ZTE saw their stock prices sink precipitously. Massachusetts-based Acacia Communications, a company that reportedly generated 30 percent of its 2017 revenue from ZTE, dropped 35 percent in early trade Monday on the news that their top customer would be taking a seven-year vacation.

More in Supply Chain