West’s war on Asian tech continues as US blocks chip sales to ZTE

17 Apr 2018

ZTE offices in Beijing. Image: Testing/Shutterstock

US government blocks sales of components to ZTE while UK’s NCSC fears negative effect on security.

The US commerce department has told US companies not to sell components to Chinese firm ZTE.

The ban is a result of ZTE pleading guilty last year to conspiring to violate US sanctions by illegally shipping US goods and technology to Iran.

It could prove devastating to ZTE since US companies supply up to 30pc of components used in ZTE equipment that features in smartphones and broadband modems.

ZTE paid $890m in fines and penalties, with an additional penalty of $300m that could yet be imposed.

The Shenzhen company also dismissed four senior employees and disciplined 35 others.

‘ZTE misled the department of commerce’

“ZTE made false statements to the US government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given and made false statements again during its probation,” commerce secretary Wilbur Ross said in a statement.

“ZTE misled the department of commerce. Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behaviour cannot be ignored.”

The move comes just weeks after the Trump administration stymied Singapore-based Broadcom’s takeover of Qualcomm.

Spying concerns

The bigger picture is, of course, the growing tensions between the western world and China over technological advancement and alleged spying concerns, making it difficult for Chinese manufacturers such as ZTE and Huawei to sell their goods to US carriers.

All of this adds up to increasing suspicion and tension surrounding the growing prowess of Asian tech companies in crucial new fields such as 5G.

But how much of this is paranoia and cynical protectionism? Or is it genuinely rooted in pragmatic and practical security concerns?

Either way, the Chinese companies are making headway, with Huawei recently emerging as the world’s third-largest smartphone maker by volume.

Huawei and ZTE also supply a considerable portion of broadband modems deployed by US and European ISPs.

To alleviate concerns, Huawei has even considered a plan to build a state-funded 5G network in the US, according to the Financial Times.

UK security fears

It has also emerged that the UK’s National Cyber Security Centre (NCSC) has warned the telecoms sector not to use network equipment or services from Chinese supplier ZTE, citing a “long-term negative effect” on UK security.

In a letter sent to UK telecoms companies, the technical director of the NCSC, Ian Levy, warned that the use of ZTE equipment or services would present a risk to UK national security.

“Mitigating the risk of external interference with equipment supplied by a particular vendor depends in significant part on telecommunications equipment being present from other vendors who are not subject to the same risk of external interference,” Levy wrote.

“The UK telecommunications network already contains a significant amount of equipment supplied by Huawei, also a Chinese equipment manufacturer. Adding in new equipment and services from another Chinese supplier would render our existing mitigations ineffective.”

It is understood that Huawei equipment is monitored by a special cell staffed by GCHQ in Banbury to ensure no interference.

Levy said that the NCSC would be challenged to manage risks if ZTE equipment was deployed at scale.

“The result would be an unacceptable national security risk to the UK telecoms infrastructure environment.”

ZTE offices in Beijing. Image: testing/Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years