The US Department of Commerce (DOC) decided last week (April 16) that ZTE Corp.’s sanctions move prohibits US companies from selling semiconductors and software to the Chinese telecommunications equipment manufacturer within seven years. Not only is it enough to drag down ZTE International's company, but if ZTE becomes the victim of this trade war, it will also destroy the entire U.S. manufacturing component supply chain with annual revenue of nearly 5 billion U.S. dollars.
Bill McClean, president of IC Insights, a market research company, said: “This ban is very shocking... It has hit one of the pride of China’s electronics industry (ZTE) and its sovereignty because the United States has decided whether ZTE can manage this business. . '
McClean and a former ZTE Mobile Engineering Manager and others believe that ZTE cannot possibly redesign its numerous telecommunications systems and mobile phones if it cannot use chips or software from US companies. There is an estimate of 74,000 for this company. For an employee's company, this is undoubtedly a fatal nightmare.
For decades, China's trade has gradually expanded to a vast overseas market and acquired western technology. This dynamic has made China the most dream and most frustrating place for US technology companies to do business.
Last year, the United States Semiconductor Corporation submitted a long list of complaints as part of the U.S. government’s investigation into China. The Trump Administration’s decision to impose a 25% import tariff on Chinese technology products is still under review. in.
All parties hope that the increased tension will quickly give birth to an agreement that can ease the long-term tension between the two sides. The recent political turn between the United States and North Korea seems to have brought about a glimmer of hope. But so far, China’s response to ZTE’s The ban and the next reaction of the United States are still unclear.
McClean said: 'These trade wars are all without a winner's slippery slope.'
At the same time as the technological politics fermented, the ZTE ban, which took effect immediately, also caused an impact.
Meet ZTE - Another Telecom Giant in China
Although ZTE’s smart phone business attracts much attention, most of its revenue comes from sales of telecommunication equipment. In 2017, ZTE’s telecommunications product revenue was US$10 billion, and consumer product sales were approximately US$5.6 billion. , equivalent to half of its 50 million mobile phone sales revenue.
In many respects, ZTE can be said to be on a par with Huawei. Both companies are highly diversified telecommunication equipment manufacturers with strong semiconductor capabilities. Both companies have benefited from China’s growing communications market and It occupies most of the market share. However, Huawei is larger, more complex, and more widely distributed in the global market.
According to the market observer Dell'Oro Group estimates, ZTE has about 10% market share in the 80 billion U.S. dollars of telecommunications equipment market worldwide. Therefore, in addition to the processor vendors Qualcomm and Intel, there are several The highly dispersed US companies in ten sectors will be affected by the US sales ban.
In view of ZTE’s significant position in the sales of the entire telecommunications system, optical component manufacturers such as InPhi and Macom became the first to suffer after the ban was announced. However, Macom immediately stated that the company’s quarterly sales in the ZTE part The amount is not the most important part, the most recent quarter was about 1.6 million US dollars. InPhi told stock analysts, its sales in ZTE is less than one percent of the overall revenue.
Qualcomm, which announced the layoffs last week, is likely to issue a statement for ZTE for the first time in its recent earnings release. Intel will report its earnings on Thursday.
Stefan Pongratz, senior analyst at the Dell'Oro Group, said: 'The industry has raised a lot of questions about the ban.' He hopes to evaluate the impact on the market and the chip level later this week.
Like many other people's opinions, he also pointed out that this decision has generally had a negative impact on industries that want government-led trade-offs. If the trade war between China and the United States continues, it may also affect the rise of up to $12 billion by 2022. 5G cellular business - After all, about half of this market is in China.
Pongratz said: 'China is expected to become one of the most advanced 5G markets in the world. The 5G experience and knowledge from China is very important for successful replication in other markets.'
Including local suppliers such as Huawei and ZTE, which account for as much as 70% of the market in China's telecommunications system business. Over the past few years, they have also been expanding their visibility globally, making European telecommunication systems giants Ericsson and Nokia Nokia. )'s market share steadily declined.
The United States bans reason? China counters it...
In the short term, China may refuse to approve the merger of Qualcomm and NXP, although this decision has been postponed again and again. In the long run, Chinese leaders are said to be considering further acceleration and they have actively promoted their own funding. The movement of the semiconductor industry.
However, McClean believes that the lack of chip technology is the main obstacle for China to establish domestic suppliers. China does not lack funds. He pointed out that China's major foundries are still trying to manufacture 28 nanometer (nm) chips. U.S. competitors have long been ahead of their four generations.
A former mobile engineering manager of ZTE, who asked not to be named, stated: 'The China and the U.S. government must solve this problem, otherwise ZTE will finish playing!' He also accused ZTE of loose internal organization and its coping with the US regulatory agencies. Company Culture.
According to the ban issued by the US Department of Commerce on April 16, ZTE admitted 380 violations of U.S. export regulations and 96 circumventions. The ban stated that ZTE had obtained hundreds of millions of U.S. dollars from Iran and sold the U.S. The routers, microprocessors and servers prohibited by law. '
The U.S. Department of Commerce’s 7-year ban also cited ZTE repeatedly making false statements, and also failed to punish 39 employees who participated in selling embargo equipment to Iran or reduce bonuses. The United States also received a 'Zhongxing Legal Department in 2011. A document prepared in August and approved by its chief executive aimed at circumventing US export control laws and promoting unlicensed exports to Iran' and treating this document as an "almost an extensive conspiracy".
ZTE said in its statement last week that it has now punished employees involved in the sale of embargoed equipment and will reduce their bonuses. The company said that last year it also spent $50 million to comply with U.S. export controls and to regulators Submitted a 132,000-page document.
The two tweets on the Internet reflect the different reactions between the two companies. A Chinese expert in the United States supported the ban decision because ZTE 'has violated the settlement agreement with the United States'. A Chinese restaurant owner provided ZTE employees A one-week free dining offer expresses sympathy for the company's unfair decision.
Obviously, the Trump administration chose to use a destructive ban on ZTE to inject destructive energy into long-term technological disputes. However, whether this way of killing chickens and monkeys is enough to allow some countries to go on Better roads, or stimulate them to carry out more in-depth combat plans, everything remains to be seen.
At the same time, the fate of this often misunderstood large company and its supplier base are still in crisis...
Compilation: Susan Hong