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Chinese Tech Company ZTE Shuts Down Operations: What Does This Mean For US Consumers?

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China's second-biggest telecom equipment company, ZTE, announced that it will immediately close down its main domestic and international operations.

Why Is ZTE Shutting Down?

In April, the U.S. Commerce Department banned American companies from working with ZTE. This export ban prevents companies from supplying ZTE with parts and technology.

The U.S. slapped ZTE with the export ban until 2025 because the company reportedly violated sanctions against Iran and North Korea. ZTE then lied to officials about the violations.

The company denies that it ever did these things.

ZTE receives many of its parts from companies in the United States, such as chips. In fact, Qualcomm and Intel provide ZTE one-third of its parts.

Without the parts, ZTE could not stay competitive in the consumer technology industry.

"As a result of the Denial Order, the major operating activities of the company have ceased," ZTE said in a statement.

ZTE was founded in 1985 and stayed in business for 33 years.

What's Next for ZTE?

ZTE is still trying to have the ban modified or reversed. The company is communicating with the United States to change the ruling and to "forge a positive outcome in the development of matters."

"It is unacceptable that [the US Commerce Department's Bureau of Industry and Security] insists on unfairly imposing the most severe penalty on ZTE even before the completion of investigation of facts," ZTE said in a statement in April.

ZTE submitted a request to the U.S. Commerce Department to change the ban.

During a recent visit with U.S. trade officials, China raised concerns over the plight of ZTE.

What Does This Mean For Consumers?

After ZTE ceased operations, it suspended online stores on its website. It closed down its e-commerce store on Taobao, and placed a "page being updated" message on it. ZTE also closed its store on Tmall, and placed an "undergoing maintenance" message on it.

ZTE sells millions of gadgets in the United States, especially smartphones. In fact, ZTE is the fourth-largest supplier of smartphones in the United States. The only companies that sell more smartphones than ZTE in the country are Apple, Samsung, and LG. As of the third quarter of 2017, ZTE had a 12 percent market share for smartphones nationwide.

Without ZTE in the market, many consumers will have to turn to another smartphone supplier instead. The next biggest suppliers are Alcatel and Motorola.

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