Huawei and ZTE’s continued clashes with the US government

ZTE’s probation in the US is coming to an end following a Texas judge’s ruling on Tuesday, according to a report from The Wall Street Journal. The Chinese telecommunications company had been under supervision by the US government since pleading guilty to illegally selling American-made equipment in Iran and North Korea in 2017. ZTE incurred a $1.2 billion fine as a result of violating US sanctions against both countries.

As the WSJ notes, US District Judge Ed Kinkeade decided not to punish ZTE for alleged visa fraud, which is the subject of a separate case that’s currently underway in Georgia. Last March, a ZTE researcher and professor at the Georgia Institute of Technology were accused of abusing the visa system to bring Chinese nationals to the US to work for ZTE. Kinkeade encouraged the government to take necessary legal action against the company, however.

Reuters and the CBC first reported that Huawei CFO Meng Wanzhou would appear in a Brooklyn federal courtroom today via streaming video and enter a plea regarding US charges against her. Canadian authorities arrested the Chinese executive in December 2018 on suspicion of violating US sanctions, and she has remained there on house arrest ever since, fighting US attempts at extradition. Hearings in her extradition case ended in August, with the ruling scheduled for October 21st.

Meng was indicted on fraud charges claiming the Chinese technology and telecommunications company misrepresented its relationship with an Iranian affiliate, along with accusations it stole intellectual property from T-Mobile. The 13-count indictment named Meng, Huawei, and two of its subsidiaries — Huawei USA and Skycom.

Huawei founder and CEO Ren Zhengfei has reportedly urged the Chinese tech giant’s staff to turn the company into a major software force as a way to alleviate the impact of devastating US sanctions. In an internal memo viewed by Reuters, Ren says that Huawei should focus on software because the industry is “outside of US control and we will have greater independence and autonomy.”

Huawei is presently unable to mass-produce much of its hardware products because of sanctions forbidding US firms from doing business with it. The company stockpiled chips and components in an attempt to mitigate the sanctions, but the reserves are limited and in some cases will be swiftly obsoleted. Huawei is also blocked from using Google apps and services on its smartphones. The Biden administration hasn’t suggested that it will reverse any of the Trump-era sanctions, although the US has eased off its moves against other Chinese companies like Xiaomi and TikTok.

Huawei has asked a court to overturn the Federal Communications Commission’s designation of it as a national security threat. The Chinese telecom argues that the FCC overstepped its authority in December 2020, finalizing a ban supported by former President Donald Trump. “The order on review potentially impacts the financial interests of the telecommunications industry as a whole,” Huawei’s request says, including network operators the FCC locked out of buying Huawei components.

The Biden administration’s FCC reiterated its support for the decision, however. “Last year the FCC issued a final designation identifying Huawei as a national security threat based on a substantial body of evidence developed by the FCC and numerous US national security agencies. We will continue to defend that decision,” a spokesperson tells The Verge.

Huawei founder Ren Zhengfei has downplayed the impact of the US executive order that could cripple Huawei’s ability to collaborate with American companies like Google and Qualcomm. In comments to Chinese media gathered at the company’s Shenzhen headquarters, reported on by the Global Times state newspaper, Ren says the 90-day extension to normal business relations granted by the US won’t make much difference to Huawei due to the company’s existing contingency plans.

“In such a critical moment, I’m grateful to US companies, as they’ve contributed a lot to Huawei’s development and showed their conscientiousness on the matter,” Ren says. “As far as I know, US companies have been making efforts to persuade the US government to let them cooperate with Huawei ... We always need US-developed chipsets, and we can’t exclude American products with a narrow mind.”

Huawei founder Ren Zhengfei basically just said his company is too big and too important to fail.

In his first public interview since his daughter — Huawei CFO Meng Wanzhou — was arrested in December, he tells the BBC that the US government’s accusations and criminal indictments, including fraud and the theft of trade secrets, won’t be enough to “crush” Huawei.

After years of facing suspicion from US authorities, Huawei is now standing trial for fraud. Today, a bail hearing was held for Huawei’s chief financial officer, who was arrested in Canada on Saturday at the request of US law enforcement. The CFO, Meng Wanzhou, is facing extradition to the US for conspiring to defraud banking institutions, according to The Star Vancouver.

Many lined up to see Meng’s bail hearing today, after the extremely high-profile arrest that signified the first major break in a US probe that has mostly been kept from the public. Meng happens to be the daughter of Huawei’s founder and CEO Ren Zhengfei, a former People’s Liberation Army engineer whose connection to the Chinese Communist Party has contributed to the suspicions of US intelligence agencies. Meng also serves as deputy chair on Huawei’s board.

Canada arrested the chief financial officer of Huawei on suspicion of violating US sanctions against Iran, according to The Globe and Mail. The CFO, Meng Wanzhou, was arrested in Vancouver on Saturday at the request of US law enforcement and is facing extradition to the US.

It’s an extremely high-profile arrest, the first major break in a probe that has mostly been kept from the public and only after long-harbored suspicions about Huawei have become widespread. Meng happens to be the daughter of Huawei’s founder and CEO Ren Zhengfei, a former People’s Liberation Army engineer whose connection to the Chinese Communist Party has contributed to the suspicions of US intelligence agencies. Meng also serves as deputy chair on Huawei’s board.

Chinese phone maker ZTE is launching the Blade Max 2S and the Blade Max View, two smartphones with lower-end specs for $180 and $200, respectively. Both phones have 6-inch 2160 x 1080 LCD screens with 18:9 aspect ratios, 1.4GHz processors, 4,000mAh batteries, and 32GB of storage.

The Blade Max 2S has 2GB of RAM, and the Blade Max View has 3GB. For $20 more, the Max View offers dual 16-megapixel and 2-megapixel rear cameras and Android Nougat, while the Max 2s has a single 13-megapixel rear camera and runs Android Oreo out of the box. On the ZTE website, the Blade Max View is listed as having a Qualcomm Snapdragon 435 processor, but no brand is listed for the Max 2S processor with the same cores and clock speeds.

Huawei and ZTE technology will largely be banned from use by the US government and government contractors. The ban was signed into placed by President Trump today as a component of the much larger Defense Authorization Act.

This caps off months of will-they-won’t-they from Republicans, many of whom view the two major Chinese telecoms as national security threats. In June, the Senate overwhelmingly passed an amendment that would have reinstated a trade ban on ZTE, potentially shutting down the company. The House, however, did not, and the big question was how the two chambers would find a compromise — or if they would drop the matter entirely.

The Democratic National Committee is warning Democrats not to use Huawei or ZTE devices, after the committee learned that one of its associated organizations was thinking of purchasing ZTE phones for members. “It’s very important that party and campaign workers not use ZTE or Huawei devices, even if the price is low or free,” DNC chief security officer Bob Lord wrote in an internal memo, as reported by CNN. Lord said people shouldn’t be using devices from either Chinese company for work or personal use.

The words echo what federal officials have already said about Huawei and ZTE posing possible security threats to the US. In February, CIA, NSA, and FBI chiefs testified in front of a Senate committee that the two companies were beholden to the Chinese government and the devices could become tools for undetected espionage. Both Huawei and ZTE have denied any cybersecurity concerns.

Senate Republicans have abandoned an effort to impose harsher restrictions on Chinese telecommunications company ZTE after the US officially lifted its trade ban on the company earlier this month, according to a report from The Washington Post. That means that President Donald Trump’s deal for the company to resume working with US companies will stand, despite significant bipartisan opposition amid worries the company could threaten US national security interests.

Earlier this year, ZTE was found in violation of a plea deal it agreed to last year after it pled guilty to selling US goods to Iran and North Korea. The Commerce Department instituted a trade ban, while the Pentagon banned ZTE and Huawei phones from retail stores on military bases. The US and China then began working toward a deal, spearheaded allegedly by Trump, that would allow ZTE to continue operating, as losing its ability to do business with American companies like Qualcomm threatened to shut down the entire company.

The United States has lifted its trade ban on ZTE, allowing the Chinese telecom to once again obtain critical parts and software from American companies, after three months of being unable to do so. The trade ban all but shut down ZTE after it went into place in April since the company was no longer able to acquire products like Qualcomm processors or Android software from the US.

In an announcement that appears designed to address security concerns around ZTE, Commerce Secretary Wilbur Ross said the department would “remain vigilant” in monitoring ZTE’s actions. “Three interlocking elements — a suspended denial order, the $400 million in escrow, and a compliance team selected by and answerable to the Department — will allow the Department to protect US national security,” Ross said in a statement.

The US government has declared another major Chinese telecom company a possible “risk to national security”: China Mobile. Yesterday, the National Telecommunications and Information Administration (NTIA) issued a statement advising the Federal Communications Commission not to allow China Mobile, which is the world’s third biggest carrier after AT&T and Verizon, to operate in the United States.

China Mobile first applied to the FCC for permission to provide US telecom services in 2011 and its application has been pending ever since. In 2013, China Mobile’s counsel wrote a letter to the FCC, requesting permission, stating “the extreme delay in granting the application is causing significant and unwarranted harm to China Mobile USA’s business operations.”

The US Commerce Department has temporarily lifted a portion of the ban on ZTE that all-but shut down the company almost three months ago. After paying a $1 billion fine, ZTE has been authorized by the United States to continue supporting much of its already deployed equipment and consumer devices. This largely seems designed to keep infrastructure up and running and allow ZTE to deliver security patches to its phones (and other products).

The eased restrictions are temporary, only lasting until August 1st. It’s not stated what will happen after that point, but Bloomberg reports that ZTE is expected to be in full compliance with the agreement it made with the US government by then, meaning the ban may be fully lifted. ZTE initially received the ban in April as repercussion for failing to follow through with penalties it received for violating US sanctions to Iran and North Korea.

A series of reports this week revealed that, for the past 10 years, Facebook’s broad sharing of data extended not only to app developers but to phone companies as well. That included an agreement with Huawei, which has already been under intense government scrutiny for potential cybersecurity risks due to its alleged ties to Beijing.

On Sunday, following a New York Times report, Facebook admitted that it had data-sharing partnerships with at least 60 device makers, including Apple, Samsung, and Amazon. These companies received access to user data, including information on a user’s friends without their consent. In some instances, they could even access the information of friends of friends, as one Times reporter with a 2013 BlackBerry found. The admission reveals that the massive Cambridge Analytica data scandal, in which the data of over 87 million Facebook users was mined through a third-party social media app, was not an outlier.

ZTE will soon be able to buy parts from the United States again after reaching a deal with the Trump administration, the Commerce Department announced this morning. The deal ends the export ban that was instituted by the Department of Commerce in April after ZTE failed to uphold a plea agreement for violating sanctions against shipping US equipment to Iran and North Korea.

As part of the deal, ZTE will be fined $1 billion by the Department of Commerce, and a new, United Stated-selected compliance team will be embedded at ZTE for 10 years to ensure similar violations won’t occur in the future. ZTE will also have to change both its board of directors and executive leadership sometime within the next 30 days. The Commerce Department says it is “the first time” it has achieved “such stringent compliance measures in any case.”

The US and China are working toward a deal that would save ZTE, the Chinese phone maker that’s been on life support since being hit with an American trade ban last month. According to The Wall Street Journal, both countries have agreed to an outline of what a deal might look like that would save the company. Discussions are still ongoing, however, and it’s still not a sure thing that the issue will be resolved.

Under the current outline, the US would lift its trade ban on ZTE, enabling the company to buy US components and use US software again. In exchange, ZTE would reportedly make significant changes, including shaking up its management and board. It would likely also pay major fines.

President Donald Trump says that he is working with Chinese President Xi Jinping to find a way for Chinese telecom company to “get back into business, fast,” following last week’s announcement that it was pausing its “major operating activities.”

ZTE said in a filing that it has just enough cash to remain afloat if it pauses operations following a US ban on exports to the company in April. Last month, The US Department of Commerce banned exports to the company for seven years, saying that it failed to uphold the terms of a plea agreement after it pled guilty to breaking sanctions against Iran and North Korea. The company said that this ban would “severely impact the survival and development of ZTE,” and that it’s been in talks with the US to try and reverse or change the ban.

ZTE is ending “major operating activities,” the company announced today, as its conditions worsen under a US ban on exports to the Chinese phone maker. ZTE says in a filing that it has enough cash to stay afloat while pausing operations for the time being. While the news doesn’t mean ZTE is completely dead, things aren’t looking good for the phone maker.

The company says it’s in talks with the US about how to reverse or modify the Department of Commerce’s April decision to ban exports and “forget a positive outcome in the development of matters.” The ban means that American companies like Dolby and Qualcomm can’t export parts to ZTE for up to seven years, which restricts ZTE’s ability to compete with other devices on the US market that have those parts.

The Pentagon is ordering retail outlets on US military bases to stop selling Huawei and ZTE phones. The Department of Defense says using the devices could be a security risk.

“Huawei and ZTE devices may pose an unacceptable risk to the department’s personnel, information and mission,” a Pentagon spokesperson said in a statement to The Wall Street Journal. “In light of this information, it was not prudent for the department’s exchanges to continue selling them.”

Chinese technology company ZTE issued a statement today in response to the US government’s banning of American exports to the company. The US Department of Commerce says ZTE didn’t uphold a plea agreement after the company pleaded guilty last year to illegally shipping US equipment to Iran and North Korea. The department specifically says the company still gave employees who acted illegally full bonuses, despite saying it wouldn’t. Additionally, only four senior staffers were fired out of the 35 who reportedly violated the law, Reuters reported.

Now, four days after the ban, ZTE says it tried to comply with the US and invested “tremendous resources in export compliance.” It says, “the Denial Order will not only severely impact the survival and development of ZTE, but will also cause damages to all partners of ZTE including a large number of U.S. companies.” It also says it could “take judicial measures to protect the legal rights and interests of our Company, our employees and our shareholders, and to fulfill obligations and take responsibilities to our global customers, end-users, partners and suppliers.” A leaked internal memo suggests that ZTE has assembled a crisis team to handle and respond to the situation.

The US Department of Commerce just announced a ban on American exports to the Chinese smartphone maker ZTE. That means American companies like Dolby and Qualcomm won’t be able to export any parts to ZTE for up to seven years. The loss of Qualcomm is particularly damaging, as it severely restricts ZTE’s options for devices in the US market.

The Commerce Department says ZTE failed to uphold a plea agreement after it pleaded guilty last year to illegally shipping US equipment to Iran and North Korea. Part of the deal was that ZTE would reprimand and deny bonuses to the employees who had acted illegally. But the company didn’t meet this part of the deal. It gave full bonuses to those employees and only fired four senior staffers while keeping 35 employees who had also violated the law on deck, officials told Reuters.

This week in Paris, I witnessed a subtle but profound moment of change in the mobile industry. It came when Huawei announced its next flagship phone, the P20 Pro, will cost €899 (more than $1,100), and no one in the audience blinked, winced, or otherwise expressed dissatisfaction. The company whose name was previously one half of a rhyming couplet with the words “who are they?” just came out with a super expensive device to rival the iPhone X and Galaxy S9, and everyone was perfectly fine with that. Not many phone makers are able to rise up into the premium market after starting out in the budget segment, but Huawei is doing it at speed and to great effect.

At roughly the same time as Huawei’s triumphant launch on European soil, US electronics retailer Best Buy was cutting ties with the company and discontinuing sales of its products. Earlier in the year, AT&T had reneged on an agreement to sell the Mate 10 Pro smartphone in its carrier stores, reportedly due to pressure from suspicious US authorities. Verizon is believed to have bowed to the same behind-the-scenes diktat a couple of weeks later, and American intelligence agencies have issued unanimous advice to the country’s citizens to avoid using Huawei phones. For more than five years, the US has been issuing unsubstantiated warnings about Huawei’s relationship with the Chinese government, and 2018 has brought that antagonism to the fore.

FCC chairman Ajit Pai has just issued a statement that confirms last week’s report from The Wall Street Journal on a coming proposal meant to deter US carriers and wireless providers from purchasing gear made by China-based companies such as Huawei and ZTE.

The proposal would “bar the use of money from the FCC’s Universal Service Fund to purchase equipment or services from companies that pose a national security threat to United States communications networks or the communications supply chain.” Pai’s statement never directly mentions Huawei or ZTE by name, but the initiative is clearly designed to keep them out of the backend of US network infrastructure.