After cutting nearly 3,000 jobs in January, ZTE hasn't had much in the way of good news to share lately. Today, it appears the Chinese smartphone maker avoided a potentially fatal blow to its smartphone business, but did so at great cost - around a billion dollars, in fact. ZTE was accused last year of violating US sanctions against doing business with Iran (I know, ZTE is a Chinese company - this has to do with US technology), and as a result the US Department of Commerce threatened to cut off ZTE from all its US-based supply chain partners. While that threat was stayed on multiple occasions, it was finally scheduled to go into effect last month, in what could have truly been a disaster for ZTE's smartphone business.
But it appears ZTE avoided the Commerce Department's guillotine, and has instead opted to pay its way out. In exchange for a guilty plea and $900 million in fines, ZTE will be allowed to continue working with its critical US supply-chain partners like Qualcomm.
A court must approve the agreement with the Justice Department, after which the Commerce Department will recommend ZTE's removal from a list of sanction violators.
Speculation that the potential motivation for the deal was to avoid being made an example by the Trump administration will likely abound - and the optics of that are difficult to ignore. Trump's administration has taken a much harder line against Iran rhetorically than the outgoing Obama administration, and the threat of being labeled a collaborator with a US adversary - or worse yet, being a company that would dare dispute such a labeling - by the President or his staff had to go into ZTE's calculus here. Most likely, ZTE hopes that its apology, admission of guilt, and payment for its alleged crime will be enough to keep it out of the President's direct line of fire.