NCSC warns telecom providers ZTE could be security risk

U.S. companies banned from selling components to ZTE		
	Brian Heater

   	7 hours

U.S. companies banned from selling components to ZTE Brian Heater @ 7 hours

The ban comes after ZTE violated an agreement that was reached after it was caught illegally shipping U.S. technology to Iran and North Korea.

"We stand ready to take necessary measures to protect Chinese companies' legitimate rights and interests", it added.

This warning follows similar action from the United States government, which has long-prohibited American telecoms firms from buying network equip from Chinese firm Huawei, and last month went so far as to warn USA citizens not to use smartphones from the Chinese companies Huawei and ZTE.

The ban follows on from a settlement agreed previous year between ZTE and the US Department of Commerce's Bureau of Industry and Security - which included the threat of the ban were it found to be non-compliant.

The ban bars USA companies from trading with ZTE, and includes the supply of components ZTE needs in order to make its smartphones and networking equipment.

On Monday (16 April), a senior USA commerce official told the FT: "The timing of this is somewhat unfortunate because it could make it seem like they are connected". In 2017, it derived 59 percent of revenue from its network business and 32 percent from its consumer business.

The Department of Commerce has now determined that ZTE has breached the settlement agreement by giving false statements and failing to enact disciplinary actions to parties originally identified as responsible for engaging in the illegal conduct.

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The company swung back into a profit last year after a loss in 2016 due to a payment of a record fine, which the company agreed to pay the U.S. government to settle a five-year probe of trade sanctions violations.

In March, ZTE admitted that while it had fired four senior employees, it had not disciplined or reduced bonuses to 35 others.

Saying ZTE was likely to miss shipments and lose orders, brokerage Jefferies downgraded its rating on the firm to "underperform" from "buy" and slashed its price target to HK$15.72, almost 40 percent below the firm's closing price prior to Tuesday's trading halt. It's also said that ZTE kept on numerous employees that had been involved with violating the law. This opened a new beginning to the argument that the foreign governments are exploiting the U.S.

The company grew to become one of the world's biggest telecoms equipment makers thanks to its cheap and affordable smart phone technology.

As reported by the Financial Times, the National Cyber Security Centre advised the UK's telecoms businesses on Monday not to work with the Shenzhen-based company because it would have a "long term negative effect on the security of the UK".

"The UK telecommunications network already contains a significant amount of equipment supplied by Huawei, also a Chinese equipment manufacturer", Levy wrote in a letter to the telecoms sector, according to the FT.

ZTE's smartphones use microchips from Qualcomm and glass from Corning. Qualcomm declined to comment. ZTE was a regular purchaser from Qualcomm Inc., Intel Corp., Acacia Communications and lumentum Holdings Inc.

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