The official, speaking on the condition of anonymity, said the timing of the ZTE action was unfortunate because it could seem related to USA steps to stop alleged theft of intellectual property.
The U.S. blocked Chinese telecommunications-gear maker ZTE Corp. from exporting sensitive technology from America, alleging the company made false statements to U.S. officials. Among its biggest customers is ZTE, which accounted for 30 percent of its entire revenue in 2017.
The Department of Commerce has now determined ZTE made false statements to BIS in 2016, during settlement negotiations, and 2017, during the probationary period, related to senior employee disciplinary actions the company said it was taking or had already taken. "And in worldwide commerce, truth is pretty important".
The ban on supplying ZTE comes two months after two Republican Senators introduced legislation to block the US government from buying or leasing telecommunications equipment from ZTE or its Chinese rival Huawei Technologies Co Ltd [HWT.UL], citing concern the companies would use their access to spy on USA officials.
Finisar Corporation (NASDAQ: FNSR) said in a 10-k filing it counts ZTE as a major client, but didn't disclose how much revenue the company accounts for.
The National Cyber Security Centre (NCSC) has warned United Kingdom telecoms providers that use of Chinese based ZTE equipment enhances the risk of a United Kingdom "national security" threat. With the ban, none of the carriers are allowed to sell the ZTE smartphones.
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 department's action against ZTE also prohibits large American companies like Qualcomm and Micron Technology from selling their chips and components to ZTE, China's largest listed telecommunications equipment supplier.
The denial order against ZTE comes amid brewing tensions between the USA and China that have raised concerns of a trade war between the world's two biggest economies. The company can resume purchasing these components from the USA after seven years.
"ZTE misled the Department of Commerce".
Allowing Huawei, ZTE, and other related entities access to USA government communications would be inviting Chinese surveillance into all aspects of our lives.
Chinese telecoms equipment group ZTE Corp hit back in February against concerns from United States lawmakers that it is a vehicle for Chinese espionage, saying it was a trusted partner of its U.S. customers.