Don’t ignore Huawei’s ban on buying US components

While everyone is focusing on the ban on selling in the US, the ban on buying US components is a much more interesting chapter of the Huawei saga.

President Donald Trump has dropped the economic dirty bomb on China and it’s dominating the headlines. Although Huawei, or China, are not mentioned in the text, the Executive Order is clearly a move to stall progress made in the telco arena. China is mounting a challenge to the US dominance in the TMT arena, and this should be viewed as a move to combat that.

There are clearly other reasons for the order, but this should not be ignored. The security argument, albeit an accusation thrown without the burden of concrete evidence, is a factor, but never forget about the capitalist dream which underpins US society.

However, although most are focusing on Huawei’s inability to sell components, products and services in the US market, there might be an argument the ban on purchasing US components, products and services is more important, impactful and influential.

“This action by the Commerce Department’s Bureau of Industry and Security, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List,” said Secretary of Commerce Wilbur Ross. “This will prevent American technology from being used by foreign owned entities in ways that potentially undermine US national security or foreign policy interests.”

While we will focus on the ban on purchasing US components, products and services for this article, it is worth noting the ban on Huawei selling in the US will have an impact.

Rural telcos in the US have mostly been against any ban on Chinese companies. In October 2018, Huawei made a filing with the FCC arguing its support for rural telcos is underpinning the fight against the digital divide and a ban would be disastrous for those subscribers. Michael Beehn, CEO of MobileNation, was one of those who argued against the ban, suggesting the cost-effectiveness of Huawei allowed his firm to operate. Without the advantage of nationwide scale, these organizations will always struggle when the price of networks is forced north.

While the US is a massive market, with huge opportunities to maximise profits, not being able to sell in the US is not going to have a significant impact on Huawei. Its customers are the rural telcos not the national ones. Huawei has not managed to secure any major contracts with the big four, therefore it is missing out on something which it never had. Huawei has still managed to grow sales to $105 billion without the US, therefore we believe this ban is not going to be a gamechanger.

However, it is the ban on purchasing US components, products and services which we want to focus on here.

Huawei is not outrightly banned from using US technologies and services, however, those companies who wish to work with the dominant telco vendor will have to seek permission to do so beforehand. The US can now effectively how strategically it wants to twist the knife already dug deep into Huawei’s metaphorical chest.

Although we’re not too sure how this will play out, Huawei’s business could be severely dented by this move.

Huawei recognises 92 companies around the world as core suppliers to the business. It will have thousands of suppliers for various parts of the business, but these 92 are considered the most important to the success of operations. And 33 of them are US companies.

Some are small, some are niche, some are more generic, and some are technology giants. The likes of Qualcomm, Intel and Broadcom all have interests in keeping the US/Chinese relationship sweet, though more niche companies like Skyworks Solutions, Lumentum and Qorvo have much more skin in the game. Firms like NeoPhotonics, who are reliant on Huawei for 46% of its revenues, might well struggle to survive.

Huawei will be able to survive this move, it has been preparing for such an outcome, but you have to wonder what impact it will have on its products and credibility.

HiSilicon, the Huawei-owned semiconductor business, has been ramping up its capabilities to move more of its chip supply chain in-house, while the firm has reportedly been improving the geographical diversity of its international supply chain. According to the South China Morning Post, not only has Huawei been moving more operations in-house, it has also been stockpiling US components in the event of the procurement doomsday event.

A similar ban on procuring US components, products and services was placed on ZTE last year and it almost crippled the firm. Operations were forced to a standstill due to the reliance on US technology. Huawei has never been as dependent on the US, though it seems the lessons were learned from this incident.

The big question is what impact a ban would have on the quality of its products.

Huawei might preach the promise of its own technology and the new suppliers it will seek/has sought, but there is a reason these 33 US companies were chosen in the first place. Either there is/was a financial benefit to Huawei in these relationships, or they were chosen because they were best in class.

Huawei is a commercial organization after all, it wants to make the best products for the best price. There will certainly have been compromises make during these selections, either paying more for better or sacrificing some quality for commercial benefits, and having to make changes will have an impact. Huawei, and its customers, will have fingers and toes crossed there is no material impact on the business.

The other aspect to consider is disruption to operations. ZTE found out how detrimental dependence on a single country can be, and while Huawei has mitigated some of this impact, it remains to be seen how much pain could be felt should the ban be fully enforced. Might it mean Huawei is unable to scale operations in-line with customer deployment ambitions? Could competitors benefit through these limitations? We don’t know for the moment.

The ban on selling in the US might sound better when reeling off headlines, but don’t forget about Huawei’s supply chain. We think there is much more of a risk here.

A look at how US suppliers have been hit by Huawei news

President Trump’s Executive Order and the decision to place Huawei on the US ‘Entity List’ is going to dominate the headlines over the next couple of days, but what will be the impact on US suppliers?

During the ZTE saga last year, where the firm was banned from using US components in its supply chain, several US firms faced considerable difficulty. With Huawei potentially facing the same fate, the next few days will certainly make for uncomfortable reading for some.

Although the main focus of the news has been on the Executive Order banning any Huawei components or products in US communications infrastructure, the entry onto the ‘Entity List’ should be considered as big. This is effectively the commerce version of a dirty bomb, and some might suggest it is being used to disrupt Huawei’s supply chain and dent its ability to dominate the telco vendor ecosystem.

But what is the impact of losing a major customer? What are the realities these US firms will face if the Secretary of Commerce turns down their application to work with Huawei?

Speaking to members of the financial community, it could be pretty severe.

Losing a customer which accounts for 2-3% of total revenues would be a concern but nothing major. For 5% of revenues, this is a headache, but something the spreadsheets could most likely tolerate. When you start getting to 10% the panic button needs to be hit.

A customer which accounts for 10% of total revenues is a major prize. Losing this revenue would result in a complete rethink in how the business operates, as this could effectively wipe out any profit for the year. If you are in the services industry, it isn’t as much of an issue, but when it comes to manufacturing and components, there are so many different implications.

For example, in the first instance you have to consider how this hits budgets, forecasts, resource allocation and manufacturing strategy.

Sales staff are probably the safest here, as the lost revenues will have to be replaced as soon as possible with new customers, but what about the marketing strategy? Do you want to replace the lost capacity with short-term customers (i.e. quicker) or long-term customers which may offer larger orders?

On the R&D side, does a company have dedicated resource working on projects for that customer? What will these staffers do now? Can those projects be re-orientated for another customer?

Finally, on the manufacturing side, there are all sorts of issues. How will the loss of revenue impact the resource recovery plan? How are the manufacturing facilities configured – do you have to close plants?

Another consideration is on your own supply chain and procurement strategies. When supplying products to said customer, you will have to source your own raw materials. Will the loss of this customer result in contracts with suppliers having to be re-negotiated? Will this mean quantity discounts are now impacted?

These are all the considerations when you are losing a customer worth 10-15% of total revenues. Anything above this and you would have to question whether the company can survive, or at least face a major restructure.

Share price of US suppliers to Huawei
Company Share price
Qualcomm -3.18%
Xilinx -4.1%
Western Digital -1.12%
Marvell Technology +0.5%
Seagate Technology +0.43
Texas Instruments +0.045
Skyworks Solutions -4.56%
ON Semiconductor -0.99%
Qorvo -5%
NeoPhotonics -12.9%
Flex -1.13%
Finisar -2.05%
II-VI -2.86%
Maxim Integrated -0.99%
Analog Devices -2%

All share prices at the time of writing (UK: 16:20) – in comparison to market close on 15 May 2019

Looking at Qorvo, executives at semiconductor supplier might certainly have something to worry about. Huawei is features in the ‘top three’ customers for the firm, while on the most recent earnings call, the team discussed the success of Huawei’s smartphone division and in particular the ‘P’ series as a contributor towards a successful quarter. Some have suggested 11% of Qorvo revenues are dependent on Huawei.

Skyworks Solutions, another semiconductor company, has been suffering in recent years. With large parts of the business reliant on smartphone shipments, the global slowdown has been tough. The team work with Huawei on both the mobile and infrastructure side, and while it does work with many tier one firms in both segments, the market is clearly worried about a competitive field and an inability to work with one of the largest telco vendors worldwide.

Both Qorvo and Skyworks supply radiofrequency chips to Huawei, which might have an effect on the Chinese vendors ability to manufacture devices. That said, the supply chain disruption will not be anywhere near as damaging to Huawei as it was to ZTE as it has HiSilicon which manufacturers many of its components.

Xilinx is another which seems to have worn the news quite negatively. The team work with Huawei’s enterprise business unit, helping with video streaming challenges. This might be the smallest business group at Huawei, though the 5G euphoria is set to offer considerable opportunities. Xilinx share price has been recovering after a 17% drop in April, though this has proved to be another set-back.

NeoPhotonics is a company which should be seriously concerned. As a customer, Huawei accounted for more than 46% of the total revenue across 2018. The executive team is relatively open with investors regarding this fact, and this might have been factored into any decision to invest, though this is a massive loss for the business to absorb.

Lumentum is another business which is somewhat reliant on Huawei. While we were not able to nail down specific numbers, the firm supplies fiber optic components to Network Equipment Manufacturers (NEM) and considering there aren’t many of them to supply to, losing Huawei will be a headache.

At Finisar, Huawei described as one of the company’s major customers, though it has seemingly been diversifying its customer base in recent years. In 2017 and 2016, Huawei accounted for 11% and 12% of the annual total respectively, though the percentage is not listed for 2018. This is because the percentage has dipped below 10%, though we were unable to ascertain what the figure now is.

We might have to wait a few weeks to understand the full extent of the impact, and how stringently the US will enforce Huawei’s entry onto the ‘Entity List’, but we suspect there will be some very stressful meetings taking place in numerous offices throughout the US.

Security discussion needs to be bigger than Huawei – Vodafone UK CTO

Huawei is an obvious risk when you are assessing the vendor landscape, but to ensure supply chain resilience and integrity, focusing too narrowly on one company poses a bigger risk, according to Vodafone.

It might be easy to point the finger at China, but according to Vodafone UK CTO Scott Petty, this is a dangerous position to take. Despite a lack of evidence to suggest backdoors are being built into Huawei products, the world is determined to find one, but in reality, there isn’t a single company in the vendor ecosystem which can justifiably state they are 100% secure. This is the world we are living in; risk is everywhere.

“The discussion about Huawei is all managing the risk appropriately,” Petty said at a briefing in Central London.

Risk is a big topic at Vodafone UK right now, and this is clear when you look at how the vendor ecosystem is being managed.

On the radio side of the network, of the 18,000 base stations Vodafone has around the country, Huawei equipment accounts for 32% of them, Nokia 12% and Ericsson taking the remainder. Interestingly enough, Nokia equipment is being phased out in favour of Ericsson. For transmission, this is split between Juniper, Cisco and Ciena, while Cisco is responsible for the core. With this blend of vendors, and appropriate security gateways between each layer of the network, Petty feels Vodafone is managing the risk very appropriately.

And while some might suggest having this much exposure to Huawei might be a negative, Petty argues radio is such low risk it shouldn’t dictate play. You have to take into consideration the risk/benefit equation.

When assessing risk, Vodafone (working with the National Cyber Security Centre) considers two possible scenarios. Firstly, what is the risk of a nefarious actor leaching data from the network, and secondly, taking down the network. On the radio side of things, the exposure is very low.

Firstly, Vodafone has 18,000 base stations throughout the UK. Should one of these base stations be compromised, only the traffic going through that base station would be at risk. This will be a fraction of the total, devices will be handed off to other base stations as people move around, while the clear majority of internet traffic is encrypted nowadays. The likelihood of a nefarious actor trying to bleed valuable insight in this manner is low.

Secondly, even if one of these base stations is taken down by the external wrong-doer, this is only one of 18,000 base stations. To have a material impact on Vodafone’s network, hundreds or even thousands would have to be impacted simultaneously. This is not inconceivable, but highly unlikely. As Petty mentioned, its all about evaluating and minimizing risk.

This is where the discussion becomes incredibly complicated. Huawei is one of the leading names (if not the leader) in the radio segment, ignoring such a vendor is a difficult decision to make as a technologist; you always want to use best in class.

For transmission, another area Huawei would be considered a leading name, the risk has been identified as medium. You would still need a lot of compute power to crack the encryption software, but Vodafone have decided to steer clear of Chinese vendors here.

Finally, onto the core, the most important part of the network. Petty pointed to O2’s issues last year, where a suspect Ericsson node effectively killed the entire network for a day, to demonstrate the importance of this component. Cisco is the vendor here, but this leads us onto the dangers of a such a narrow focus on security.

When looking for signs of a telco vendor assisting a government for intelligence activities, there is arguably only one piece of concrete evidence to support such claims. Edward Snowden produced this evidence, proving Cisco was aiding the NSA for its own spying agenda. This is the reason we suspect the US is so convinced China is spying on the rest of the world; the US government is doing the same thing and therefore knows it is technologically possible.

We are of course not accusing Cisco of aiding the US government in this manner at this moment, but such is the sophistication and technological capabilities of those on the dark web, no company should consider themselves 100% secure. They have their own supply chains which could be vulnerable at some point. The complexities of this ecosystem mean nothing is 100% secure, therefore it comes down to risk assessment, and also the mitigation of risk through layers of security, gateways and encryption.

For Petty, the establishment of Huawei’s European cyber-security centre is a step in the right direction, though he would want the European Union to play an active role in its operations and for the net to be cast wider, considering all vendors. As mentioned before, too much of a narrow focus on one area heightens the risk in others.

However, the talk of a Huawei ban would be a disaster for everyone involved.

“We don’t think a complete Huawei ban would be a proportionate response,” said Helen Lamprell, Vodafone UK’s General Counsel & External Affairs Director.

If risk is appropriately managed and mitigated, business can continue as usual. Policy decision makers have to realise there is no such thing as 100% secure. A broad-sweeping ban on Huawei would be disastrous not only for Vodafone UK, but everyone in the connected economy.

Firstly, you have to think of the cost of removing all Huawei equipment. This would cost hundreds of millions and take a considerable amount of time. This would delay the introduction of 5G and fundamentally undermine the business case for ROI. It could set 5G back years in the UK, not only for Vodafone but the whole industry.

The supply chain review is currently working its way through the red maze of UK government, and while the certainty needs to arrive sooner rather than later, getting the review right is better than speed.

The message from Vodafone this morning was relatively clear and simple; the Huawei risk can be managed, but an outright ban would be disastrous.

Competition is a problem, removing Huawei could be disastrous – Vodafone CEO

With all eyes in directed towards Mobile World Congress this week, Vodafone CEO Nick Read took the opportunity to vent his frustrations.

Competition is unhealthy, accusations are factually suspect, protectionism is too aggressive, the trust with customers has been broken, collaboration is almost non-existent. From Read’s perspective, there are plenty of reasons the 5G era will be just of much of a struggle for the telcos as the 4G one.

And of course, it wouldn’t be a telco press conference if there wasn’t a reference to Huawei.

“I would like a new contract for the industry, I want to go out and build trust with consumers and businesses,” said Read. “This will require us to engage government and build the vision of a digital society together.”

Read has reiterated his point from the last quarterly earnings call, there needs to be more of a fact-based conversation around the Huawei saga. There is too much rhetoric, too much emotion, and perhaps, too much political influence.

Huawei is the punching bag right now, but any ban or heavy-handed response to US calls for aggressive action would be a consequence for everyone.

As Read points out, Huawei is a significant player in almost everyone’s supply chain, controlling roughly 28% of mobile infrastructure, while Nokia and Ericsson also have market share in the 20s. Removing one of these players from the market will further compound a problem which plagues the industry today; the supply chain is too concentrated around a small number of vendors.

There simply isn’t enough diversity to consider removing a key cog to European operations.

Of course, you have to consider the status quo. The US is happy to ban Huawei as it has never been a significant contributor to its infrastructure. Should the same ban be enforced in Europe, negotiations would be de-railed, and operations disrupted. Read suggests this would set 5G plans back by two years across the bloc.

The issue here is of confidence to invest. Why would telcos enter into deep negotiations when future conditions have not been set in stone. This is already evident in Vodafone’s decision to pause work on the core with Huawei; delaying these important initiatives could push Europe further behind global 5G leaders. Telcos need confidence, certainty and answers. The longer reviews go on, the more precarious the situation becomes.

This is one of the many challenges the industry is facing. There is an ‘us versus them’ mentality when it comes to telcos. Read is referencing the relationship with regulators and government, suggesting a lack of collaboration which is negatively impacting the ability to operate, but it is also evident in the relationship with the consumer and competitors. Collaboration is a key word here.

One example of collaboration is in the UK where the National Cybersecurity Centre effectively monitors Huawei equipment. This model could be rolled out across Europe, though Read’s stressed the point that there would have to be a harmonised approach. Fragmentation is the enemy here, and it would stifle progress. If there is a European level of monitoring, or even if it is taken down to nation states, it doesn’t actually matter as long as it is consistent.

The Huawei ban is set to become one of the talking points of this years’ MWC, that is not necessarily an idea anyone will be surprised about, but what we are not sure about is the disruption. Will it slow 5G development? Has the uncertainty already slowed 5G development? Will the anti-China rhetoric, dilly-dallying and confusion kill Europe’s ambitions in the global digital economy?

Our supply chain won’t tread the ZTE path – Huawei CEO

One of the biggest stories of the year, and one of the major catalysts of the US/China trade war, was ZTE’s brush with extinction, but Huawei thinks it’s robust enough to withstand the US economic dirty-bomb.

During the Summer, ZTE was caught violating US trade sanctions with Iran and subsequently was banned from using any US products or IP within its supply chain. The move from the US almost destroyed ZTE, with the company ceasing operations for a couple of weeks, but Huawei’s Rotating CEO doesn’t think his firm would be under the same risk.

“We all know the ICT industry highly depends on a global supply chain,” said Hu. “And Huawei is no exception. Today we have 13,000 suppliers in our supply chain. Companies coming from Japan, US, Europe, China and many other countries in the regions. Take this year for example, our annual procurement spend would be 70 billion dollars.”

With CFO Meng Wanzhou currently on bail in Canada, Huawei is facing questions it probably doesn’t want to answer. The connection with Skycom looks to be much closer than some US financial institutions were led to believe, suggesting Huawei has been violating US trade sanctions with Iran. Should the US take the same action as it did with ZTE earlier in the year, Huawei could face the same ban on US exports.

The issue with ZTE was its dependence on the US for its supply chain. Huawei will also have the US feature prominently through its own supply chain, but Hu is confident it would stand up to any potential punishment dished out by the US.

“We take a diversified supply strategy,” said Hu. “That means we have a multi-sourcing strategy.

“We look at multiple choices in terms of technology solutions, and we also have multi-location supply networks. At the same time, since we’re working together with hundreds of telecom operators in the world, and also, we are serving a significant number of enterprise customers, so we look at the full lifecycle support that is needed and build up our stock of spare parts and components to ensure support across the product lifecycle.”

The company is also working to produce its own alternatives to some technologies which might not be able to be replicated elsewhere. A prime example of this is the Android mobile operating system.

As it stands, should the US impose a ban on Huawei its smartphones and wearable devices would be relegated to the role of doorstop. With this in mind, Huawei is attempting to create its own mobile operating system. It will probably be no-where as good as what the Android OS can offer, others such as Samsung have tried and failed, but it is certainly better than nothing.

Being banned from using US components and IP would certainly be a negative for Huawei, and it certainly isn’t a scenario which is out of the question, but Huawei seems to be in a better position than the suspect ZTE.

Telcos fighting back against vendor strangle hold

The balance of power has been firmly in the hands of the vendors for years, but now we are witnessing the telcos aggressively pushing back and wrestling for control of their own fate.

This is not a battle which can be won over night, it is a war of attrition which will be fought quietly. There will of course be passive aggressive comments, you can expect bold statements and it wouldn’t be the telco space without hollow promises of evolution, but what we are now witnessing is the slumbering telcos emerge from the shadows.

Throughout the keynote sessions and pre-conference workshops at this year’s Big Communications Event in Austin the battle lines are being drawn. The Open Networking Foundation spoke about a reconstruction of the supply chain, AT&T’s Melissa Arnoldi talked up the telcos white box dream, Reliance Jio’s President Mathew Oommen boasted about in-house developments, while Telstra’s Jim Fagan cooed over the benefits of open source. All of these comments indicate the telcos are trying to wrestle back control of the industry.

This is the complicated situation the telco industry has evolved to. For years the operators have found themselves searching for innovation externally. The likes of Huawei, Intel or even Ericsson on occasion held the trump cards, dictating the terms of the relationship. This is still the case as it stands, but the telcos are seemingly not going to sit quietly and do what they are told anymore.

Open source projects are key here, as is the disaggregation of software and hardware, alongside a operational model which allows for innovation and experimentation in-house. This is not to say proprietary solutions will disappear, but they will have to settle into their own place. Another critical factor is the attitude of the operators. Slowly we are starting to see a backbone emerge, challenging the status quo, and wrestling the balance of power back into the buyside camp.

Of course it will not be the smoothest of roads. The separation of software and hardware is an excellent example of where we are likely to see some resistance. The status quo leans towards vendor lock-in, and subsequently guaranteed business for the vendor. The new world of disaggregation offers flexibility and empowerment for the operators, and an entirely new business model for the vendors. The question is who will embrace the change and who will resist. Samsung has been making encouraging comments, but how much substance there is remains to be seen.

A healthy industry is one where the balance of power is evenly distributed through the ecosystem. This is not the case in telecoms, but the right noises are certainly being made. Hopefully there will be action to back-up the claims and power-plays being made by the operators.

Could Trump be the ZTE saviour?

The threat of extinction for ZTE was realistic as it seemed the US was gaining the upper hand in the apparent US/China trade war, but President Trump might prove to be an unlikely hero for ZTE.

Only a couple of days after ZTE announced it was ceasing all major operations as a result of the US ban shattering the firms supply chain, Trump revealed in a couple of tweets he and President Xi were working alongside each other to turnaround fortunes. Few would have predicted this turn of events, but the Trump presidency has been anything but predictable to date.

What this actually means remains to be seen. Details are expectedly light, but Trump has called the US Department of Commerce into action to save the troubled telco vendor. The Department of Commerce has not made an official comment as yet, but what might be expected are tighter restrictions on ZTE.

This is part of what makes the situation complicated. The threat of expulsion and restrictions was not enough to keep ZTE honest the first time around, so what the Department of Commerce can do this time is not known for the moment. Both parties are heading into waters unknown for the moment, but perhaps this will be a bit of a wake-up call for ZTE.

Certain aspects of the ZTE business need to remain reliant on the US, but it has been reported that 80% of the business is. ZTE’s relationship with Google is pretty much unavoidable, such is the dominance of Android on the OS world, but allowing such a dependence everywhere else to develop over time now looks like a ridiculous development.

While Trump coming to the saviour of ZTE might have surprised some, it could prove to be an inspired move. The President now seemingly has the upper hand at the negotiating table with the Chinese government; the US can now effectively decide the future of the business. That is a powerful card to hold.

ZTE fears for its very survival following US export ban

Following the decision from the US government to activate the Suspended Denial Order, ZTE has hit back with the threat of a lawsuit, claiming the order not only threatens its own survival but that of its suppliers.

While the order might have had the objective of knee-capping a specific Chinese company, the fallout has also sent shockwaves through the US technology scene. Companies like Acacia Communications, Oclaro and Lumentum Holdings, all of whom are US companies reliant on ZTE as a major customer, have seen share prices plunge. The US government might have hit bullseye when it comes to tackling ZTE, but the friendly-fire has been spraying all over the country.

“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,” ZTE said in a statement. “In any case, ZTE will not give up its efforts to resolve the issue through communication, and we are also determined, if necessary, to take judicial measures to protect the legal rights and interests of our Company, our employees and our shareholders, and to fulfil obligations and take responsibilities to our global customers, end-users, partners and suppliers.”

It is difficult to get a handle of the damage which has been done at ZTE primarily because there are so many moving parts and a huge number of possible scenarios. The loss of customers in the US is only the tip of the iceberg, ZTE is huge reliant on US technology and intellectual property. Some estimates say 80-90% of ZTE technology is reliant on some form of US input, while Qualcomm supplies around 70% of the chips used in its smartphones.

This is devastating for ZTE. Who knows how long recrafting the supply chain to make sure there are no US components involved would take. It is a task which has probably never been undertaken before.

That said, the lobbyists in Washington must be hammering the front door of the White House. Anti-China sentiment has been a long-standing tradition of US governments, but this order takes the stakes up who-knows how many levels. In trying to cripple a Chinese beast, the White House has possible resigned hundreds, if not thousands, of employees to the dole queue within its own borders. Acacia Communications, Oclaro and Lumentum Holdings are the three companies who have been hit hardest, but there will of course be dozens of firms who are less reliant on the firm, though the order will still have a material impact on the business. ZTE is after all one of the world’s largest telecommunications vendors.

Legal action will potentially follow, though ZTE might be able to negotiate its way out. Judicial action does not necessarily mean lawsuit, there will be steps to take before this point is reached, including an appeal. Before too long, assume the Chinese government will wade into the mediation mess, while ZTE will be calling on its US suppliers for backup as well. That said, don’t expect the US to have a sympathetic ear. The US government is going to try and make an example of ZTE as it flexes its muscles over China