Chinese telecom giant ZTE is reacting to the penalties handed down from the U.S. Commerce Department.

In addition to fines that could exceed $1.2 billion, ZTE is fighting for its financial future after getting hit with a seven-year ban on buying components from U.S. companies.

ZTE says the harsh penalty will not only hurt the world’s fourth largest smartphone maker, it’ll harm many U.S. companies that profit from sales to ZTE.

CGTN’s Sean Callebs reports.

The U.S. took direct aim at ZTE for breaking a plea bargain.

Last year, the company admitted to illegally shipped U.S. technologies to Iran and the DPRK, violating sanctions.

ZTE promised to punish dozens of its executives. It didn’t, triggering the ban.
But, U.S. companies could be collateral damage.

“This is probably like a lose-lose situation, and a lot of U.S. companies are going to suffer, and U.S. consumers are going to suffer as well,” said Tao Zhang of Dao Ventures.

ZTE issued a response to the U.S. Commerce Department’s decision to ban the sale of American-made parts and software to the company for the next seven years.

ZTE calls the move “unfair…” and “unacceptable,” adding  “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 US companies.”

For example, nearly a third of sales from the U.S. optical networking equipment maker Acacia came from China. 

And, major players such as Qualcomm, Intel, Microsoft and Google could take severe hits too. “With Google, it’s definitely harmful because all of a sudden they may not have access to millions of customers in China,” said Robert Weiss, President of the International Tech Law Association.

Last year, ZTE sold around 19 million handsets, doubling its U.S. market share to more than 11 percent.

It made the United States ZTE’s largest market.

But now, it’s clear that many U.S. companies will feel the bite.

And, some experts warn things could get even worse down the road. 

“This is definitely a wake-up call to China, particularly considering a lot of the Chinese companies have a great reliance on the U.S. side for components and technology.”

If anything, the experts say this latest trade flare up between the U.S. and China highlights Chinese dependence on U.S. technology — most notably American-made semiconductors. 

There is no question the ban has the potential to decimate ZTE, the company saying the decision basically has the company in a “coma.”

But, there are many telecom experts who believe the U.S. action is just the latest salvo in the ongoing trade conflict between Washington and Beijing. 

Many believe there’s a chance – just a chance – that ZTE could negotiate a lighter penalty.