Tag Archives: ZTE

US Further Closes The Door To Chinese Tech Companies

Screenshot of US Federal Communications Commission order baning authorisation for sale in United States of products from five Chinese tech companies, November 21, 2022

THE FIRST RESTRICTIONS on Chinese telecom equipment being used in US networks because of security concerns came from the Obama administration. The Trump administration stepped them up dramatically, particularly against kit made by Huawei and ZTE. The Biden administration has now widened the restrictions further.

On November 26, the US Federal Communications Commission (FCC) said no equipment produced by Huawei, ZTE, two companies that make video surveillance equipment, Hikvision and Dahua, and two-way radio systems supplier, Hytera, would be authorised for use in the United States, citing national security grounds.

The ban is not retroactive, so the five firms can still sell their products and services previously approved for sale in the United States. However, the FCC is seeking comment on future revisions to the rules regarding equipment already authorised to be imported or sold. To this Bystander, that appears to be a step down the path towards future revocation of existing approvals.

The FCC specifically mentioned a threat to US citizens’ data security. The five companies have previously all denied supplying data to Chinese authorities.

Hikvision is the only one of the five to respond publicly so far, saying the ruling will 

make it more harmful and more expensive for US small businesses, local authorities, school districts, and individual consumers to protect themselves, their homes, businesses and property.

Its security cameras, like those made by Dahua, are widely used by US government agencies. Many police departments in the United States use Hytera radios.

The latest bans fit a broader pattern of containing the development of China’s indigenous tech industry. The Biden administration has also expanded US export controls to prevent the sale of advanced US hardware and software to China, especially that for making cutting-edge semiconductors. 

It is also pressuring US tech companies to move their supply chains out of China. The reported decision by the Taiwanese contract manufacturer Foxconn to move half its global iPhone production for Apple from China to India would be a significant win for the Biden administration; it would also disrupt the huge networks of sub-contractors and component makers and assemblers that feed into Foxconn’s Chinese supply chains. That would diminish the economies of scale benefiting the smaller Chinese companies, which also supply indigenous brands.

US officials and the US arm of ByeDance’s short-form video platform, TikTok, are also discussing how TikTok can assuage concerns that the data it collects on its US users will not be shared with Chinese authorities. Calls for the app to be banned in the United States are increasing, particularly from Republican lawmakers. 

However, the politics of banning a popular consumer app, especially among younger US citizens who vote 2-1 Democrat rather than Republican, complicate any decision the Biden administration might take, including following through on a Trump administration proposal that TikTok be forcibly divested to a US owner.

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Canada Finally Bans Huawei From Its 5G Networks

CANADA’S DECISION TO ban Huawei and ZTE from providing equipment for the country’s 5G network suggests that flesh is, at last, being put on the bones of the comprehensive new approach to China that Prime Minister Justin Trudeau has been promising since last year.

Nor can it be a coincidence, this Bystander suspects, that the announcement comes in the wake of the United States preparing sanctions against Hikvision and ahead of US President Joe Biden’s trip to US allies in Asia, where he will unveil the United States’ long-awaited Indo Pacific Economic Framework.

Canada’s decision brings Ottowa in line with the other members of the ‘Five Eyes’ intelligence-sharing community (the United States, United Kingdom, Australia and New Zealand). 

The decision to ban Huawei and ZTE had been expected once China freed two Canadian citizens last September who had been ensnared in the diplomatic row caused by Ottawa acceding to a request from Washington to detain Huawei’s CFO, Meng Wanzhou, on suspicion of sanctions evasion.

Concerns among Canadia’s telecom operators about the extent of re-equipping that the bans will make necessary may have caused the subsequent delay. They will now have two years to remove any 5G equipment from the two Chinese companies already installed and five years to replace any used for current 4G service. However, there will be no government money to do so.

Beijing’s response has been boilerplate, accusing Ottowa of political manipulation and colluding with Washington. The Chinese embassy in Ottowa said in a statement:

China will comprehensively and seriously evaluate this incident and take all necessary measures to safeguard the legitimate rights and interests of Chinese companies.

That suggests some foot-stamping but likely little if any material retaliation.

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ZTE Reportedly Under US Bribery Investigation

ZTE logo displayed at the 2015 Mobile World Congress in Barcelona, Spain. Photo credit: Kārlis Dambrāns. Licensed under Creative Commons 2.0.

THE UNITED STATES may have become suddenly gripped by the Covid-19 pandemic, but there is no loosening of its tech contestation with China.

Telecom group ZTE Corp. is under investigation by the US Justice Department for allegedly bribing foreign officials to gain advantages in the world telecom market, according to US media. Authorities have declined to comment on the reports; the company has said that it is ‘fully committed to meeting its legal and compliance obligations’.

Three years ago, ZTE paid $1.2 billion to settle charges that it had violated US export controls and pleaded guilty to shipping equipment from the United States to Iran. The following year, a US judge ordered a further two years of court monitoring of the company after determining that ZTE had not taken the corrective steps agreed in the 2017 settlement.

The reports of ZTE’s alleged infractions come hard on US President Donald Trump signing into law on March 12 a ban on telecoms carriers operating in the United States from buying network equipment from ZTE, Huawei Technologies and other companies ‘deemed a national security threat’.

The law also authorises funding for smaller carriers, usually serving rural communities, to strip out and replace equipment already bought from such suppliers. Sustaining service to rural America (and by extension a bedrock sector of his political base) is a priority for the president in this election year.

On March 11, the Trump administration extended to May 15 the temporary licenses due to expire on April 1 that allow some US firms to keep doing business with Chinese tech firms, despite Huawei being added to the administration’s trade blacklist in May. The extension cited the need for rural carriers to be able to continue to service customers in some of the most remote areas of the United States.

The US Commerce Department has also sought public comments on whether there should be future extensions, typically a prelude for future rulemaking, likely in this case to be an ending of the licences.

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Trump’s 540 Degree Turn On ZTE

THIS BYSTANDER FRANKLY admits to being confused.

US companies were banned earlier this year from selling components to telecoms equipment maker ZTE for seven years on national security grounds, export business worth several hundred millions of dollars. This sanction led to ZTE, which relied on US companies for up to 30% of the components of its phones, ceasing operations, prompting President Xi Jinping to ask his US counterpart to reconsider the penalty. US President Donald Trump then asked his Commerce Department to reconsider the penalty, seemingly as part of a prospective broader trade deal between the two countries.

Now, following criticism from both Democrats and fellow Republicans after the recent US-China trade talks that he is losing the trade war against China, Trump says what he wants is an additional heavy fine and a requirement that ZTE  “buy a big percentage of their parts and equipment from American companies”.

Wasn’t buying US-made components the national-security concern that led to the sanctions on ZTE in the first place?

We understand that US export sales and jobs are at issue, but we are still left scratching ourheads. But such contradictions seem to be the hallmark of Trump’s trade and foreign policy.

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