Qualcomm, Dolby, and others banned from selling components to ZTE for 7 years
In a move that is sure to damage the company’s brand, the United States Department of Commerce banned American-based companies from exporting goods to Chinese phone manufacturer ZTE. The biggest stinging point of this ban lies in ZTE’s loss of access to Qualcomm components, including the Snapdragon line of SoCs.
The ruling comes as a consequence of ZTE’s actions after a court ruling last year. ZTE pled guilty in a United States federal court to violating U.S. economic sanctions against Iran and North Korea. ZTE illegally circumvented the sanctions, selling phones and other goods to the two countries. The U.S. court ruled that ZTE had to pay $890 million in penalties with a possible additional penalty of $300 million. ZTE also had to dismiss four senior staffers and cut bonuses or otherwise discipline 35 others key employees.
It has now come out that ZTE did not follow through on these actions. While it terminated the employment of the four executives as ordered, it did nothing to punish the 35 designated employees. ZTE admitted last month that it had taken no action against the 35 employees in question. In response, the Department of Commerce instituted a full ban on any U.S. exports to ZTE specifically for the next seven years.
Perhaps the biggest consequence is that ZTE can no longer use Qualcomm-manufactured processors or SoCs in their smartphones. Qualcomm is perhaps the most recognizable name in the world of smartphone SoCs; the brand is the leader in the mobile silicon market, thanks in large part to the prolific use of its Snapdragon line of chips. Qualcomm SoCs are used in many of the highest-end Android devices, including the Samsung Galaxy S9, Google Pixel 2, and more. ZTE won’t be able to use Qualcomm’s hardware or (perhaps more importantly) the brand for the next 7 years.
Dolby is another American company that has partnered with ZTE in the past. ZTE has relied heavily on the Dolby Atmos brand as a selling point of its smartphones, boasting that the devices’ Dolby-branded speakers are among the best available.
Other smaller or less-well-known American companies have been negatively affected by the ban. Acacia Communications Inc. shares fell by 34.7%, a drop influenced by the fact that nearly a third of the company’s 2017 revenue came from ZTE.