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Chinese tech giant ZTE ceases operations after ban on using U.S. components
- hkmurakami 8y agoChipmaking may go inhouse within national borders, but how many companies make Semiconductor Capital Equipment? That's an even more concentrated industry than the chip industry itself. The top 10 companies in the industry represent 90% of the market share by revenue, and 9 out of 10 are based in the US or Japan. (1 is Dutch) The trend would dictate further export controls upstream. https://seekingalpha.com/article/4053221-top-10-semiconductor-equipment-companies-grew-14_1-percent-2016-will-repeat-2017 https://seekingalpha.com/article/4053221-top-10-semiconducto...
- Nokinside 8y agoSemiconductor industry is a strategic industry. Even if China is not isolated from the global trade the same way as Soviet Union once was, it must duplicate several industries if it want's to act independently from the global order.
- deleted 8y ago[deleted]
- hoodoof 8y agoCombine this sort of thing with China's increasingly aggressive military stance, and in the long term, maybe medium or short term, world trade is going to be completely reshaped. Reliance on other countries now looks risky. If you manufacture in China, you're crazy if you don't have a backup plan for your operations being shut down as an outcome of government action on one side or the other.
- Karishma1234 8y agoThat is where India can come into picture.
- pm90 8y agoNo, they were repeatedly warned to not violate sanctions but kept ignoring those warnings. If you break the law you have to deal with the consequences.
- ronyclau 8y agoAs released by the the Department of Commerce, ZTE has a document detailing: 1. how they evaded the sanction against Iran (destroying documents, re-export through a third country, deliberately removing logos from cargos, etc) 2. rewarding, rather than disciplining, staff involved in the evasion of sanction, an outright violation of the agreement they signed with Doc for a probationary punishment instead of a full-blown one 3. the resumption of sanction-evasive behaviors, while fully aware they are under active investigation Did I mention ZTE had prepared another document detailing exactly how their competitor Huiwei does the same?
- glenndebacker 8y agoSeems to be only for Chinese companies then... https://www.newyorker.com/news/news-desk/the-iran-business-ties-trump-didnt-disclose https://www.newyorker.com/news/news-desk/the-iran-business-t... You really must be extremely naive to think that this has pure to do with not following the rules after all the different arguments Americans/British have produced why companies like Huwaei/ZTE/... (because America is so trustworthy) are bad. I have the feeling that they just found a stick to beat the dog.
- pc2g4d 8y agoSomebody help me understand: does the US really try to enforce its export controls not just on our own country, but on foreign countries? Many countries trade with Iran---do we really expect to keep all our goods from making it there by way of third-parties?
- roywiggins 8y agoThey're called secondary sanctions. https://www.exportcompliancematters.com/2016/07/25/secondary-sanctions-can-prove-tricky-u-s-non-u-s-companies/ https://www.exportcompliancematters.com/2016/07/25/secondary...
- genericone 8y agoThis is absolutely the point of sanctions, its the modern day equivalent of siege warfare. Using some arbitrary method, choke the flow of resources into a nation-state and then the economy takes care of the rest. The nation-state gives in to the demands if it is not strong enough. Anyone who attempts to get around the methods imposed is basically trying to break through the siege.
- pm90 8y agoYes. That is how sanctions work. And since US companies supply so much hi tech equipment and Financial instruments, banning a country from any trade with US companies is basically an indirect way of shutting them down.
- thisisit 8y agoYes and for a good reason. A good, maybe extreme, example is of A.Q. Khan. It is suspected that US supported Pakistan with nuclear technology. Then Khan's company ERL helped Libya, North Korea, Iran and China develop their own nuclear weapons program. https://en.wikipedia.org/wiki/Abdul_Qadeer_Khan#Proliferation_of_URENCO_technology https://en.wikipedia.org/wiki/Abdul_Qadeer_Khan#Proliferatio...
- runamok 8y agoYup. There are all kinds of entities you are not allowed to do busines with. In fact you usually need to know who the end-user is, etc. However, this gets most important with ITAR and EAR which are items with military or "dual use" applications... https://en.wikipedia.org/wiki/International_Traffic_in_Arms_Regulations https://en.wikipedia.org/wiki/International_Traffic_in_Arms_... https://en.wikipedia.org/wiki/Export_Administration_Regulations https://en.wikipedia.org/wiki/Export_Administration_Regulati...
- brisance 8y agoWhy is the NY Times spinning this as a "tech Cold War"? ZTE got caught violating US sanctions against North Korean and Iran, and repeatedly lied to US officials about it. https://www.commerce.gov/news/press-releases/2018/04/secretary-ross-announces-activation-zte-denial-order-response-repeated https://www.commerce.gov/news/press-releases/2018/04/secreta...
- joe_the_user 8y agoBecause these sanctions campaigns are themselves remnants of the original cold war?
- propman 8y agoThe NYT has easily the best journalists and in my opinion the best written articles but post 2016, the constant Anti-American stance is entwined in every article regardless of the subject. For subjects I have in depth knowledge of, it's honestly pathetic how they subtlety spin everything into anti-America by deliberately omitting key pieces of info. Bloomberg for whatever reason has started having more and more misleading headlines and articles, ironically right as they head to a subscription model. The WSJ I still subscribe too, mainly because it's more business and less politics related though the comment section unfortunately resembles only a slightly more dignified version of a Breitbart commenter.
- tyjen 8y agoSensationalism sells.
- Karishma1234 8y agoThis is mostly going to be a restructuring. Chinese companies will continue to help (and according to me they should) Iran and North Korea. Now they are going to split US only and non-US entity.
- stefan_ 8y agoZTE pretty much admitted the denial order is their end. From the denial order: note that in its response to BIS 's notice of proposed activation of suspended sanctions and in making its case for leniency, ZTE acknowledged that it had submitted false statements, but argued that it would have been irrational for ZTE to knowingly or intentionally mislead the U.S. Government in light of the seriousness ofthe suspended sanctions. The heart ofits argument is the question, posed by the company in rhetorical fashion, asking " why would ZTEC risk paying another $300 million suspended fine and placement on the denied parties list, which would effectively destroy the Company, to avoid sending out employee letters of reprimand and deducting portions of employee bonuses?" ZTE argued that BIS should not act until the company completed an internal investigation so that ZTE could answer such questions.
- bigiain 8y agoI guess this has just become a relic: https://flic.kr/p/JS7QJd https://flic.kr/p/JS7QJd (ZTE Firefox Phone. Still works too, I powered it up the other weekend... Might have to put a SIM in it - I bet nobody's targeting _that_ with zerodays...)
- chrischen 8y agoI'm completely baffled by the US stance towards Iran. I understand they want to eliminate Israel, but given that they suffered US meddling of a democratic election, capitulated to the reduction of their nuclear program and inspections, and otherwise cooperative with US demands, what is the reason for continued sanctions? Is it due to the sheer inertia of legacy policies, the Israeli lobby? I can understand if it's the sheer inertia of legacy policies, since we managed to sanction Cuba for no good reason. The people that end up getting hurt from these policies set by average people thousands of miles away are just average citizens.
- lamarpye 8y agoFor some reason, you didn't mention all of the terrorist activities Iran engages in. Or hundreds of US soldiers killed by Iran. Learning about them might reduce your level of bafflement.
- chrischen 8y agoCan you provide sources? I'm going off of reports like the View News report on Iran (HBO episode). They just showed normal teenagers who had to make skateboards out of iron because they couldn't buy any real skateboards. Seeing as how there was Iran deal on the table that Obama pushed for, then that means reducing/removing sanctions is not as crazy as you are proposing.
- tim333 8y agoThe Iranian people are ok. It's their present government that leaves something to be desired. There's a long and messy history partly kicked off by us Brits and the CIA overthrowing their democratic government to grab their oil https://en.wikipedia.org/wiki/1953_Iranian_coup_d%27%C3%A9tat https://en.wikipedia.org/wiki/1953_Iranian_coup_d%27%C3%A9ta...
- lamarpye 8y agoI am not surprised to hear HBO take on Iran. Skateboards, pretty damning stuff. But it's not just skateboards: https://en.wikipedia.org/wiki/Iran_and_state-sponsored_terrorism https://en.wikipedia.org/wiki/Iran_and_state-sponsored_terro... https://en.wikipedia.org/wiki/LGBT_rights_in_Iran#Capital_punishment https://en.wikipedia.org/wiki/LGBT_rights_in_Iran#Capital_pu...
- kevin_b_er 8y agoI wonder what the retaliation will be.
- bluetwo 8y agoRebranding.
- deleted 8y ago[deleted]
- solotronics 8y agoTo me it seems we are finally starting to play the same game as the Chinese, they strategically use companies on a national scale to gain and keep trade advantages. I think in some cases such as metal refining they are able to coordinate on a national scale with the strategy of their government and outmanuver independent companies. I consider this recent move the US government waking up and starting to really fight the Chinese in key economic areas.
- chris_wot 8y agoGod, I hope not. That leads to far more serious consequences, like out-and-out war. Trade has its downsides, but one positive consequence is that it does help reduce the likelihood that two sides will get into military conflict with each other.
- solotronics 8y agoThe Chinese have basically no proven offensive capability outside their immediate sphere of influence compared to the US. Compare the Navies and Air Forces of each country and also the experience fighting foreign wars with complicated logistics and such. From a geopolitical standpoint there is probably close to zero chance of them initiating a war anywhere near north america. They have however been fighting a trade war and somewhat of a cold war for years against the US.
- jkingsman 8y agoCurious if this will start a trend for more and more manufacturers to take as much in house as they can if they're dependent on the US market for components. Huawei and Xiaomi are already getting rolling with it.
- joebadmo 8y agoGiven that this is about Iran/N. Korea sanctions, why does it get conflated with "tech cold war"?
- natch 8y agoThe violations relate to technology.
- shub 8y agoYou think if Apple, IBM, Amazon, or another American giant got caught doing this kind of stuff they would get sanctioned nearly as hard by the Trump administration?
- thefounder 8y agoI belive Xi would do the same.
- cf498 8y agoIs China trying to enforce any kind of similar ban? I got the impression that trying to enforce unilaterally imposed global sanctions is a US thing. The next best thing coming to mind are UN embargos
- yumraj 8y agoExactly, imagine a US company supporting Tibet/Dalai Lama or Falun Gong etc. China would most definitely ban them from doing business in China.
- cf498 8y agoDo you have an example for that? I looked around a bit and only found China not buying from weapon manufacturers anymore who also supplied Taiwan. When it comes to pressure on topics like Tibet they seem to mostly pressure countries instead of companies.
- pm90 8y ago
- airesQ 8y agoThis will foment a lot of anger. It does look to me that the US is really at its best here in applying the rule of law, and following the contract it had with ZTE to the letter. But others will find it hard to believe, especially with Trump at the helm.
- chris_wot 8y agoI can't stand Trump, and I personally find it hard to believe. There's a reason they got banned from military bases.
- thotaway 8y agoIt’s a company created by the Chinese government. They’ll just create another one to replace it.
- Nokinside 8y agoZTE is a public company. It's considered "state controlled" not state owned because majority of stock is owned by private investors. If ZTE is liquidated and Chinese government controlled companies buy its assets and start production again, private investors lose billions.
- frandroid 8y agoEven with China's scale, you don't rebuild a 75,000-person tech company from scratch. Brand awareness is quite important in the consumer electronics sector, and it would take a lot of effort and investment to retake that #4 cellphone vendor position with a new brand.
- chrischen 8y agoCan't they just pull a General Motors?
- RIMR 8y agoNo, it really wouldn't. They already have all the staff and the tech. They just need to rebrand, and since the new company won't be ZTE, they'll just start buying American components again. Replace all ZTE ads with ads for the new company, and never explicitly say that this is the rebirth of ZTE, while still making it very obvious to the consumer. This will all be a blip on the radar. For those who remember the TechTV/G4 merger - remember when The Screen Savers was "cancelled" and then a "new show" called Attack of the Show started airing in the exact same timeslot, with the exact same people, on the exact same set - but the branding was different? That's what the Chinese government is going to do to ZTE and all its assets.
- lamarpye 8y agoSeems like a lot of work to maintain a presence in the North Korean and Iranian market. What if they do all of the rebranding and the US government says, "Sorry its the same company".
- RachelF 8y agoLong term, this will backfire on the US. China will probably just develop more stuff locally, further reducing US influence.
- threeseed 8y agoThis makes no sense. China was always going to develop more stuff locally and the US influence in the IT space was always going to decline. It's just a fact when you have a country as big as China rising in prominence and strength you will see declines elsewhere. But when it comes to consumer products the US still has an innate understanding of how to build products for the world. And China may be great at building and duplicating but they haven't yet demonstrated how to do this from scratch.
- pault 8y agoThey can learn how to manufacture high quality products for the global market easier than the US can grow a billion people. Food for thought.
- vl 8y agoUS can grow to a billion+ people easily, it's just standard of living would be abysmal.
- beamatronic 8y agoIt just occurred to me that under extreme circumstances the US could force a worldwide brain drain overnight by relaxing immigration standards to allow anyone with a college degree on a fast track to a green card.
- khuey 8y agoIf our political system were run by cold-blooded technocrats that would be an interesting way of competing with China.
- 8y ago
- frandroid 8y agoConsidering how much of their sales were in the U.S., and knowing the kind of threats the U.S. government had already made to Huawei, it was pretty dumb of them to ignore U.S. government warnings and investigations over what must have been piddly sales by volume (though probably with quite a profit margin, since no one else was selling to Iran). Now it's totally blown up in their face.
- chrischen 8y agoIf its' a "war between China and the US" then dissolving and reforming a company doesn't seem like that big of a deal.
- hzhou321 8y agoRightly so. At this point seems China has all the condition but a necessary kick in the butt.
- partiallypro 8y agoThe Chinese government would likely gladly subsidize the company just to screw the US.
- dvfjsdhgfv 8y agoThis would mean inconsistently treating Iran and North Korea in different ways.
- newnewpdro 8y agoI didn't see it mentioned in the article - what is the cost to the US companies losing ZTE's business?
- RIMR 8y agoI don't know the exact numbers, but I imagining it is substantial in the short-term. Also, this motivates China to produce more components domestically, which will permanently sway Chinese companies away from US suppliers, so in the long-term, this could do tens of billions of dollars in damage to the US.
- newnewpdro 8y agoPerhaps the assumption is that ZTE's competitors sourcing similar US components will make up the difference in increased sales when ZTE's business falters.
- est 8y agoZTE order lots of electronic parts from US. The supply chain would suffer. Also the are some small carriers which relies on cheap Chinese Huawei/ZTE phones and cell towers.
- exabrial 8y ago> According to the United States government, the company used an elaborate system to sell American-made goods there, and then lied and deleted emails when the Commerce Department began to investigate. It even made plans to resume shipments to Iran while the investigation was ongoing, according to the Commerce Department. Unfortunately the truth doesn't make good headlines like "TRUMP STARTING TRADE WAR", but I think this best sums up what's happening and why.
- volgo 8y agoShould ban Apple in response. Would be hilarious