In ZTE Battle, US Suppliers Are Collateral Damage

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People with direct knowledge of the talks have told the scribe that some Chinese officials have met with industry groups, regulators, and even the massive National Integrated Circuitry Investment Fund to ramp up the already very aggressive plans for developing this sector.

The DOJ's actions follow a larger pattern of the USA increasingly cracking down on Chinese firms. Acacia Communication and Oclaro Corp, both major suppliers for ZTE, plunged 36% and 15% after news broke, and Qualcomm was also down. Chinese battery and electric carmaker BYD, chip maker Taiwan Semiconductor Manufacturing Corp.

The US has taken a recent stance against Huawei's products.

Huawei and ZTE have denied these allegations.

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Earlier this month, the Commerce Department banned ZTE, China's second-biggest network equipment maker, from buying USA -made components as punishment for violating a sanctions settlement over transactions with Iran and North Korea. The U.S. government effectively barred the Chinese firm from buying American technology in a move that will severely impact ZTE's ability to produce its own smartphones, and could send shockwaves throughout the rest of the smartphone supply chain. Neither the Justice Department nor Huawei have confirmed that the investigations are taking place. It was reported that the US Department of Justice is looking into whether Huawei may have violated the country's sanctions against Iran. The US banned American tech companies from selling hardware and software to ZTE for seven years.

Analysts said a worst-case scenario could entail Huawei suffering the same fate as smaller Chinese rival ZTE which has lost access to US -made components as well as Google Android software in a similar probe. Although the United States government could use it as evidence to launch further investigations into Huawei. Verizon later followed in AT&T's footsteps and dropped plans to sell Huawei phones, according to a Bloomberg report.

While the Chinese government was unsurprisingly angered by the United States decision - "The move should be regarded as part of the U.S. tactics in its trade friction with China".

The investigation, which sources say has been running since 2016, could anger China.

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