So far, 2018 has been a bad year for Chinese technology companies in the US. January started with the news that the US government had intervened to kill deals that Huawei was making with Verizon and AT&T, which would have helped the Chinese company sell its flagship Android phones in the US. Then just two weeks ago, ZTE was hit with an export ban that will prevent it from using any US-made technology in its devices, which will create all kinds of problems.
According to a report this morning from the Wall Street Journal, things have got even worse. The Justice Department is investigating whether Huawei violated US sanctions with regards to Iran, sources tell the WSJ, an action that could result in criminal charges for Huawei executives, and provide a killer blow for the company’s ambitions in the US and Europe.
This isn’t the first time that Huawei has been accused of flouting US sanctions. The Commerce and Treasury departments have asked Huawei for information about potentially violating behavior before, but the involvement of the Justice Department and reports of a criminal investigation make the matter much more serious.
A Huawei spokesperson said that “Huawei complies with all applicable laws and regulations where it operates, including the applicable export control and sanction laws and regulations of the UN, US and EU.”
ZTE’s export ban, which went into effect last week, was also the result of sanctions violations. In that instance, ZTE plead guilty to conspiring to violate US sanctions against Iran and North Korea in a US court last year, and promised to pay a fine, fire some staff, and withold bonuses from others as punishment.
But as the Commerce Department revealed last week, ZTE never reprimanded its 35 lower-level employees, and worse, it made false statements to the Department about its compliance. As a result, the Commerce Department enacted a seven-year sanction on ZTE, which was part of the initial guilty plea but suspended, pursuant to ZTE carrying out the other steps it promised.
Enacting an export ban on a premier smartphone manufacturer could prove to be a major deterrent.
Qualcomm, a US company, has a near-stranglehold on the best processors available for Android smartphones, and sanctions would make it impossible for an overseas company to use Qualcomm processors in its devices. Using key software, such as the Google Suite of apps for Android, could also be off-limits.