It was reported a few days back that ZTE was banned from purchasing American products for the production of its smartphones and other devices. It has caused a lot of tension for the company as well as other Chinese firms, who even doubted at the ability to use Android. However, according to the investor note of ZTE, the company has been forced to stop the operations, which include the manufacturing of smartphones as well.
According to the investor note, ZTE says that “As disclosed in the announcement of the Company dated 20 April 2018, BIS has issued an order for the activation of a denial order (the “Denial Order”). As a result of the Denial Order, the major operating activities of the Company have ceased.”
The US ban on the purchase of products had put ZTE under a huge amount of pressure, since the Chinese manufacturer could not purchase processors from Qualcomm or Intel. Apart from the hardware side, ZTE is also disallowed from the use of Android operating system, which is owned by Google, a US company. Due to all these negative scenarios, the company has decided to turn back and stop the production, until the issues have been fixed. As far as the company is concerned, it does not have anything in the inventory, making it impossible to produce new units.
The ban was imposed on ZTE due to its violation of the embargo. The company had exported its products to Iran and North Korea, which caused the US to take this hard action against the company. As of now, market and industry of China are not capable of producing enough hardware to meet the requirements of ZTE or other manufacturers. It is imperative that they have access to US products like Qualcomm and Intel, without which the production would cease. Some other manufacturers like Huawei are also under investigation for the same issue.