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Acacia, Lumentum Fall As ZTE Ban Hits Optical Component Makers

17 April 2018

The U.S. Department of Commerce has banned American companies from selling components to telecommunications firm ZTE after the Chinese company allegedly made false statements to U.S. regulators.

Aside from illicit distribution of American resources, the U.S.is also accusing ZTE of lying to officials, "and obstructing justice including through preventing disclosure to and affirmatively misleading the U.S. Government".

A worker installs the logo of ZTE, a Chinese communications company in Nanjing, China. ZTE agreed to a criminal and civil fine of $1.19 billion in 2017, and in addition to this, said it would fire four of its executives and either reprimand or cut back bonuses of 35 other workers.

Viavi Solutions (VIAV) is one company that has business with ZTE, though only a small amount, according to William Blair analyst Dmitry Netis. "This egregious behavior can not be ignored". The company will now be banned from incorporating any commodity, software or technology from United States companies in any of its products. While ZTE makes a range of models, it's made particular in-roads in the US with budget handsets that are sold through discount and prepaid carriers.

Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, called the ban highly unusual and said it would severely affect the company.

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In a letter sent to telecoms firms, ZTE itself and regulator Ofcom, Ian Levy, director of the National Cyber Security Centre (NCSC), warned the use of ZTE equipment or services within existing infrastructure "would present risk to United Kingdom national security that could not be mitigated effectively or practicably". The letter also warned that because ZTE is owned by the Chinese state, meaning it could be at risk from new laws that allow China to influence any companies and individuals that have "wide-ranging powers of compulsion".

The Department of Commerce has now learned that ZTE made false statements to the USA government during the 2016 settlement negotiations as well as the 2017 probationary period.

The UK's National Cybersecurity Centre (NCSC) has written to UK telcos warning them that using network equipment manufactured by Chinese firm ZTE would negatively impact the UK's national security.

ZTE has sold handset devices to US mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp.

Trade tensions with China have been rising, with the Trump administration threatening to impose tariffs on Chinese imports. -China relations-which stretches from a proposed FCC action against ZTE, Huawei and other companies to Trump's allegation that China and Russian Federation are intentionally devaluing their currencies-the department's action against ZTE takes on an added significance. Although Commerce Department officials would not discuss the report, they said the department followed up in February.

Acacia, Lumentum Fall As ZTE Ban Hits Optical Component Makers