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A Commerce Dept. ban puts the survival of China’s ZTE, the fourth largest seller of phones in the U.S. at risk. How does it impact the U.S. consumer
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ZTE, maker of Android phones popular with budget-minded consumers, may be down for the count — at least as far as the U.S. is concerned.
The first blow came last month when the U.S. Commerce Dept. banned American companies from exporting products to the Shenzhen, China-based telecom firm for seven years.
Then on Wednesday the smartphone maker said that it would cease “major operating activities,” raising questions not only about its future survival, but the impact on U.S. consumers who have previously bought or were thinking of buying ZTE phones.
ZTE is one of the few Chinese companies that has seen some success selling phones in the U.S, mainly of the lower cost models.
John Marick, the CEO of Consumer Cellular, a cellphone company that sold entry-level ZTE Android phones to its core customer, an older consumer, says “we’re obviously watching this very closely and anxiously.”
He says “a lot of our efforts have been around warranties and making sure that if ZTE isn’t able to honor that warranty that we’re able to.”
According to the Hong Kong-based global research firm Counterpoint, ZTE has the fourth largest market share among smartphone makers in the United States, behind only Apple, Samsung and LG.
“The abrupt disappearance of the number four smartphone vendor in the U.S. is shocking, but there are plenty of companies that will be able to step in and claim ZTE’s ‘low-price, high-value’ position,” says Avi Greengart, research director for platforms and devices at GlobalData.
He named TCL (Alcatel) and LG as immediate beneficiaries, since they have existing relationships with U.S. carriers. Lenovo (Motorola) and Coolpad will also look to swoop in and grab share, he says
Though ZTE said in a filing that it “maintains sufficient cash and strictly adheres to its commercial obligations,” it previously warned that the ban would “severely impact the survival and development of ZTE,” and “also cause damages” to all its partners including a large number of U.S. companies.
As of Thursday morning, ZTE handsets were still available for sale on Amazon.com and BestBuy.com. Reports indicate however that the phones were no longer for sale on ZTE’s own store on Alibaba’s Tmall website. My own attempts to access the ZTE store on Tmall failed.
The Commerce Dept. ban came down on April 16 when the government accused ZTE of violating the terms of a March 2017 settlement in which ZTE pleaded guilty and agreed to pay $1.19 billion for illegally shipping telecommunications equipment to Iran and North Korea.
Separately, lawmakers in the U.S. have placed ZTE and even larger Chinese telecom companies in the crosshairs over their reputed ties to the Chinese intelligence and military establishment.
ZTE has not responded to a USA TODAY request for comment.
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Email: [email protected]; Follow USA TODAY Personal Tech Columnist @edbaig on Twitter