ZTE’s woes are no surprise. The Chinese telecommunications provider has faced a lifetime ban from trade practices in the United States. Their misery took a turn for the better when the US lifted the trade ban for a hefty fine and cumbersome restrictions. Now that ZTE has been allowed to buy US technology and get back to business, the path from here on is not going to be the same as before according to GlobalData, a data and analytics company.
The Chinese Company is heavily reliant on sales through US carriers. Political pressure is not going to decrease anytime soon. ZTE will need to make structural changes to ensure that the carriers can combat the political pressure from the US security agencies and Congress according to GlobalData.
Avi Greengart, Research Director, Consumer Platforms & Devices at GlobalData commented,
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“The most critical action ZTE can take is to separate its consumer device business from its network infrastructure. It may be impossible to prove that ZTE’s networking products have no security vulnerabilities, but its smartphones are based on US silicon and software platforms. ZTE Devices needs its own management team based outside of China, and for financial transparency, it should be listed separately on a Western stock market. At the same time, ZTE Devices should rebrand to something without ‘ZTE’ in it — perhaps to Axon, its premium brand.”
ZTE’s smartphone division can make use of this split and rebrand the smartphone business. Even if things start going smoothly in the United States, they will face a backlash from Chinese companies who will be advocating less reliance on US technologies. ZTE is in a pickle right now and there is no saying when they will get out of it. They are currently under scrutiny by the United States Commerce Department and the scrutiny is not gonna end anytime soon.
