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ZTE will reportedly pay a ton of money to the US to lift its hardware ban

The agreement, which has not been confirmed by either ZTE or the U.S. Commerce Department, reportedly has other conditions besides the new fines.

Published onJune 5, 2018

  • A new report claims ZTE has signed a preliminary agreement with the U.S. government that would allow it to once again use parts from U.S. phone suppliers.
  • The report says ZTE could pay a total of $1.7 billion as part of the agreement.
  • There are other conditions that ZTE must abide by in this settlement, including getting rid of its current board members and executive team.

It’s looking more and more like ZTE will be saved, thanks to a new agreement between the China-based smartphone maker and the U.S. government. Reuters reports, via unnamed sources, that ZTE has signed a preliminary agreement with the U.S. Commerce Department that would allow ZTE to once again buy parts for its devices from U.S.-based hardware and software suppliers such as Qualcomm and Google.

ZTE would still have to pay the U.S. government up to $1.7 billion in fines as part of this new settlement, according to the report. That includes $1 billion paid up front, and $400 million that will be placed in escrow, in case ZTE is found to have violated the terms of the new settlement.

Smartphone shipments drop globally 3%, ZTE’s shipments drop by half

The U.S. government is also reportedly planning to include the previous $361 million fine that ZTE paid as part of an earlier agreement in 2017 in this new settlement. That fine was ordered after the company was found to have sold phones to Iran and North Korea, which are the subject of U.S. trade embargoes. In 2018, the government placed a seven-year U.S. parts supply ban on ZTE, as it claimed the company had not yet disciplined 35 of its employees, which was a condition of the 2017 deal.

The parts ban looked like it was going to shut down ZTE once and for all, but a few weeks ago, the company got a new and unexpected ally in U.S. President Donald Trump. He announced on his Twitter page that he was working with China’s president Xi Jinping to help give ZTE “a way to get back into business, fast.”

In addition to the money it will have to pay, Reuters says ZTE must replace its current board members and executive team within 30 days as part of the agreement, and also allow for unlimited access to its sites to prove that the hardware and software made in the U.S. are being used correctly.

Trump administration will let ZTE reopen in exchange of fine and security guarantees

Officially, a U.S. Commerce Department spokesperson said that no definitive agreement between the agency and ZTE has been signed. Reuters stated that while ZTE has signed onto the settlement “in principle”, it has not yet signed the current amended agreement. This deal has been highly controversial, as a number of members of the U.S. Senate, including lawmakers from both the Republican and Democratic parties, have stated ZTE’s phones are a major security threat, claiming they could be used by the Chinese government to spy on U.S. citizens. ZTE has repeatedly denied these claims.