Back in April, as punishment for continued violations of a previous export ban settlement with the US, the US Department of Commerce’s Bureau of Industry and Security enacted a denial order against ZTE. The order effectively cut off the company off from receiving most US technology, and as a result of this ban, ZTE’s operations, which heavily relied on importing both hardware and software from the US, ground to a halt, putting the future of the company in doubt. However ZTE’s immediate woes now appear to be coming to an end; the Bureau of Industry and Security and ZTE have come to an agreement that will see the US tech ban suspended in return for a massive settlement, leadership changes, and allowing significant & ongoing US oversight of the company’s compliance.

Under the terms of the settlement, ZTE is paying an immediate $1B fine, on top of the existing $892M in fines they’ve already paid related to their misconduct in this case. Furthermore the company will have to completely clean house on its executive team and board of directors, replacing all of the members in both of those groups. Meanwhile to ensure ongoing compliance, ZTE is being required to put a further $400M in escrow, which would be forfeit if they violated US export regulations again. And the company will be required to host and pay for a US-selected compliance team that will oversee the company’s compliance over the term of the agreement.

In return, the US will be suspending – but not removing – the US technology export ban that has caused the company to grind to a halt to begin with. This would allow the US to quickly re-instate the ban if ZTE violates the terms of the 10 year agreement. Overall this an unprecedented agreement with the BIS in both the size of the fines and the overall scope of the compliance monitoring.

The immediate ramifications of this deal are that although ZTE is becoming cash-poorer, this will allow them to resume day-to-day business operations and get the business moving again. This includes once again being able to receive Qualcomm SoCs and the Android OS for their smartphones, along with the numerous components used in their networking gear.

There are also some political ramifications to this deal – which are outside the scope of AnandTech’s purview – but as the New York Times notes, many see this as part of a larger peace offering in ensuring a new trade deal between the US and China.

Source: US Department of Commerce

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  • Sttm - Thursday, June 7, 2018 - link

    A billion dollars, firing everyone in a leadership role that engaged in or allowed the Iranian business, US monitors to prevent new management from following that path, and they get to be in business again with American products.

    Seems like a fair deal. I am sure the 70,000+ employees who didn't have anything to do with it will be glad to have their jobs back.

    And hopefully this gets some cooperation out of China on the overall trade package, and North Korea.
  • Samus - Thursday, June 7, 2018 - link

    That's the most positive way to look at it. But the fact that they were essentially aiding terrorism by selling products to Iran should in itself be zero-tolerance. Most economists, security advisors, and the majority of congress feel this way.

    Which begs the question...what is China going to do for Trump now that he essentially brought their second largest Telecom back to life?
  • Yojimbo - Thursday, June 7, 2018 - link

    Sounds like chopping off your own nose to spite your face. The real reason these people in power don't negotiate is because they are afraid of losing. A safe policy based on arrogance lets them hide their cowardice behind a veil of strength.
  • Reflex - Friday, June 8, 2018 - link

    This was already answered. Apparently, the Chinese government will back a Trump linked project. More frustrating is that beyond the Iran issue there is also the fact that ZTE (and Huwei) both aggressively spy on their foreign customers, something both have been caught doing repeatedly. They are among the worst about IP theft as well.

    But Trump gets his new hotels and golf course, so fair deal, right?
  • Yojimbo - Friday, June 8, 2018 - link

    I have no idea why you think that story is directly related to the ZTE situation or that the ZTE situation can be linked solely to that. It's a very weak link for anything. China is loaning money to a state-owned construction company that is building a theme park in Indonesia that has some Trump branding? China probably loans billions of dollars to their own construction companies every month for projects all over the world. And the fact seems to be that Trump has lost money since becoming President, not gained it. I am not sure how people can convince themselves that Trump thought he would make money by attacking the establishment and turning himself into a media pariah, unless they think he really believes that he can leave a positive legacy on the U.S. and therefore build his brand that way for his descendents.

    In any case, IP theft is a large problem with Chinese technology trade and extends far beyond ZTE. I don't know how it works with the Chinese government, whether they have an active part in it or if they just look the other way, but it is part of what Trump can address with pushing China on trade. If Trump refuses to negotiate on ZTE and insists on killing it, then he has much less chance of getting any sort of concession from China as far as IP theft policing is concerned. It's the U.S. Senators who seem to be willing to look the other way while it happens in order to not upset the apple cart that's making them money.
  • close - Friday, June 8, 2018 - link

    This had nothing to do with selling stuff to "terrorists". Are you forgetting that US law enforcement was buying espionage and hacking equipment/software from companies that sold the same to the Syrian, North Korean, and other such regimes?

    This was 100% political. Some of the US allies (like Saudi Arabia) also demanded it so it was non-negotiable. It's a trade in which one side first dug a hole for the other and then extended a helping hand.
  • Yojimbo - Friday, June 8, 2018 - link

    "This had nothing to do with selling stuff to "terrorists".... This was 100% political."

    Who calls Iran a terrorist? Governments making decisions on terrorists, selling stuff to "terrorists", foriegn powers, and selling stuff to foreign powers is 100% political. You seem a bit confused as to what politics is...

    As for Saudi Arabia, I really doubt the U.S. is more worried about them than China. You sound a little like Michael Moore.
  • sonny73n - Saturday, June 9, 2018 - link

    Samus calls Iran a terrorist.
  • close - Friday, June 8, 2018 - link

    Yojimbo, "IP theft" is always a problem with rising empires.

    It's how the world works.
  • Yojimbo - Friday, June 8, 2018 - link

    The accuracy of the comparison is only appropriate to the moral charge of the accusations. But the moral charge of the accusations are irrelevant. Self-interest alone is enough to warrant one protecting one's stuff. There's no need to invoke community-preserving values. It'd be the same if someone invaded the U.S. It would be irrelevant whether you think that invasions are "how the world works" or whether you think invasions are somehow morally wrong. The obvious course of action is still to defend yourself.

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