President Donald Trump wrote in a tweet yesterday that he was working with China’s President Xi to “give massive Chinese phone company, ZTE, a way to get back into business, fast.” He continued, “Too many jobs in China lost. Commerce Department has been instructed to get it done!”
In April, the U.S. Department of Commerce forbade American companies from selling components to ZTE until 2025 after the company failed to comply with terms of a U.S. sanctions case. In response, ZTE last week said it would no longer be manufacturing telecom equipment.
During trade talks between the U.S. and China last week, Reuters reported that the Chinese government had appealed to the U.S. to amend this ban.
Following the President’s tweet, White House Deputy Press Secretary Lindsay Walters said that Trump is expecting that Commerce Secretary Wilbur Ross will use his best judgement and will uphold laws and regulations “to resolve the regulatory action involving ZTE based on its facts.” Walters also said that this tweet from Trump “underscores the importance of a free, fair, balanced, and mutually beneficial economic, trade, and investment relationship between the United States and China.”
This represents a switch from the U.S.’s stiff stance on ZTE. Former Assistant Secretary of Commerce under former President Obama Kevin Wolf told the Financial Times that he was “highly confident that a [U.S.] president has never intervened in a law enforcement matter like this before.”
Nada Bakos, a former CIA analyst, wrote in a tweet that “You cannot trade on security. Promoting jobs in China for a telecom company that is known to be beholden to the Chinese govt, puts US citizens and sensitive info at risk.”
The Chinese government also issued a statement regarding the new stance, saying it appreciates the “positive statement” and will maintain close communications with the U.S. administration on issues regarding ZTE.
Also following the White House’s reversal on ZTE, China reopened its review of Qualcomm’s proposed acquisition of NXP Semiconductors. The country’s Ministry of Commerce halted its investigation last month amidst growing trade tensions between the U.S. and China. Notably, ZTE relies on Qualcomm and other U.S. companies for an estimated 25 percent to 30 percent of the components in ZTE’s equipment.
Trump said the countries were working together on trade in a second tweet. “China and the United States are working well together on trade, but past negotiations have been so one sided in favor of China, for so many years, that it is hard for them to make a deal that benefits both countries. But be cool, it will all work out!”
The ban last month on ZTE not only hurt ZTE, but it also hurt U.S. companies that ZTE buys from. While some competitors, particularly in the optical components business, could benefit from the ban, others would see negative effects.
According to market research firm IHS, Huawei leads the global market in optical systems with 29 percent. Ciena follows at 14 percent, and ZTE and Nokia are tied at 13 percent. In this regard, many analysts believe that Ciena could benefit from the demise of ZTE.
However, companies, such as as Acacia, that sell components to ZTE but don’t compete with the company will see negative effects on business should the ban remain.
Additionally, service providers and mobile operators, particularly those in China, could see widespread ramifications should the ban remain in place.
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