China looks to speed up chip plans as US trade tensions boil

China’s ZTE shares suspended after US hits company for breaking plea bargain over Iran exports

After losing access to US-made components, ZTE may have its 'Android license' revoked

The Commerce Department banned American companies from selling parts and software to ZTE for seven years.

Economic issues should not be politicised in order to stifle competition, the official China Daily newspaper said in an editorial on Wednesday after a US decision to ban American firms from selling parts and software to China's ZTE Corp.

About a year ago, ZTE pleaded guilty to violating US sanctions against Iran and North Korea. The denial order, effective immediately, restricts ZTE Corporation and ZTE Kangxun from participating in any way in any transaction involving any hardware, software, or technology that is exported / re-exported or to be exported / re-exported from the United States and is subject to the U.S. Export Administration Regulations (EAR). "The action targets China, however, it will ultimately undermine the USA itself", Xinhua quoted spokesperson Gao Feng of the Ministry of Commerce as saying. The two countries have already proposed tens of billions of dollars in tariffs in recent weeks, fanning worries of a full-blown trade war that could hurt global supply chains as well as business investment plans. A likely outcome could be that ZTE loses access to the Google suite of apps, but still being able to use the rest of the operating system.

Chinese social media has seen an outpouring of support for ZTE, and the country's newspapers have placed the blame on the company's troubles on China's dependence on imported conductors, according to Reuters.

ZTE shipped 46.4 million smartphones past year, placing it seventh among Android-based manufacturers, according to research firm IHS Markit. "Google and ZTE declined to comment".

If Alphabet does end up deciding to pull ZTE's GMS license (known as the Mobile Application Distribution Agreement, or MADA), that's decidedly worse news than not being able to buy Qualcomm chips. Its deal with the USA government included penalties and fines totaling more than a billion dollars, but allowed it to continue doing business with US suppliers.

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Pai did not specify China or specific companies.

Huawei as a result has been largely blocked out of the United States market as lawmakers discouraged firms in the country to buy equipment from Huawei.

ZTE said its board postponed a meeting to approve the results while it reviews the order.

The ban could be catastrophic for ZTE, the fourth-largest smartphone vendor in the United States, as it is estimated to rely on USA firms for almost a third of crucial components such as chips in its products. The source added that employees now feared for their jobs.

The company slashed lobbying expenditures to $60,000 in 2017 from $348,500 in 2016, according to Huawei filings.

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