Chinese Regulator Slams ZTE As 'Stupid and Passive' Following Devastating US Sales Ban

The hits keep coming for Chinese telecom giant ZTE. Last week, the U.S. Department of Commerce announced that ZTE would be banned from buying components from U.S. companies for a period of 7 years due to its blatant disregard for a plea agreement to atone for previous transgressions. 

Now, a major Chinese regulator is coming down hard on ZTE, and is blaming the company for making the country look bad. China's State-owned Assets Supervision and Administration Commission (SASAC), which regulates domestic enterprises, said that ZTE's actions were simply "stupid and passive". SASAC went on to add that not only do the actions (and sometimesinaction) taken by ZTE harm its own business operations, but also suppliers and other companies that it depends on.

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SASAC continued to blast ZTE, stating that the company lacked "social integrity", that "our country’s diplomatic layout and image will inevitably be affected", and that "[ZTE has] taken risks to engage in illegal operations numerous times.”

ZTE's misdeeds with respect to the U.S. government included proving networking equipment to sanctioned countries like North Korea and Iran. The company agreed to pay a total of $1.2 billion in fees and criminal penalties for making false statements and obstructing justice (among other things). In addition to the monetary punishment, ZTE agreed to a probationary period during which it was supposed to discipline senior leadership and other employees that were involved in the illegal sale of equipment.

However, ZTE only ended up firing a total of four employees (out of the dozens that were involved) and actually gave bonuses to some senior executives. Throw in the fact that ZTE continued to obstruct investigations during the probationary period, and it should come as no surprise that the Department of Commerce came down hard on the company.

“ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation,” said Secretary of Commerce Wilbur L. Ross earlier this month. “ZTE misled the Department of Commerce. Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behavior cannot be ignored."

Due to the 7-year purchase ban, ZTE will be unable to purchase the necessary components to assemble the smartphones that it sells in the U.S., including the requisite Qualcomm Snapdragon processors and necessary LTE baseband hardware.

Tags:  Qualcomm, China, ban, zte, sasac