ZTE has relied heavily on the Dolby Atmos brand as a selling point of its smartphones, boasting that the devices' Dolby-branded speakers are among the best available. Now, the U.S.is pulling the trigger.
ZTE was originally investigated for doing business with Iranian and North Korean firms in 2012 and was found to have lied to the United States about its business.
ZTE phones might not be very well known or popular in Western markets, but ZTE has a lot of great devices in its lineup. ZTE kept 35 employees that were tied to the illegal activities.
ZTE can't buy Qualcomm chips anymore, following a decision by the US Department of Commerce.
Where in the world does ZTE go from here?
As punishment, the government threatened to cut off ZTE's global supply chain, which would effectively destroy the company. A report today from Bloomberg suggests that the violation comes from ZTE agreeing to fire four employees, while disciplining others as well as taking away their bonuses. As part of a plea deal, ZTE was supposed to reproach any employees involved and revoke bonuses.
ZTE was caught red-handed engaging in trade that violates USA law. It also paid $890 million in fines.
ZTE had planned to introduce a 5G smartphone in about a year, with possibilities for a 5G table or wireless-internet hub, Cheng Lixin, ZTE's USA chief, said at the CES trade show in Las Vegas in January.
"The Ministry of Commerce will pay close attention to the progress of the situation and stands ready to take necessary measures to safeguard the legitimate rights and interests of Chinese companies".
The UK's National Cybersecurity Centre (NCSC) has written to UK telcos warning them that using network equipment manufactured by Chinese firm ZTE would negatively impact the UK's national security.
"This is going to tank their stock", Jacobson added. Last year, AT&T pulled out of negotiations to sell Huawei phones in the US amid pressure over national security concerns.
This new sanction is also likely to draw more ire from China towards the United States. The majority of the ZTE smartphones in the U.S. are sold by the carriers. That means the the company will no longer be able to get Qualcomm's latest chipsets, which are widely used in premium smartphones across the industry.