Chinese Tech Giant May Be First Victim of a New U.S. Cold War

Chinese Tech Giant May Be First Victim of a New U.S. Cold War

In Iran, it was secrecy of another kind that got ZTE into trouble.

According to the United States government, the company used an elaborate system to sell American-made goods there, and then lied and deleted emails when the Commerce Department began to investigate. It even made plans to resume shipments to Iran while the investigation was ongoing, according to the Commerce Department.

“At home, they might have been doing some things not according to standards, and then, when it came time to internationalize, they might not have done so entirely properly,” said Gu Wenjun, chief analyst at ICwise, a semiconductor market research firm in Shanghai.

“For other companies thinking about how to follow the rules and manage internal risks, I think this is going to serve as a wakeup call,” Mr. Gu said.

At the very least, the sanctions against ZTE appear to be supercharging Beijing’s determination to upgrade China’s microchip makers, which have struggled to keep up with global industry leaders despite state support.

Chris Lane, a telecom analyst in Hong Kong with Sanford C. Bernstein, believes that China now has the resolve to whip its semiconductor industry into world-leading shape, even if it takes a decade to do so.

“They’re going to pour billions of dollars into preventing this from ever happening again,” he said. “In the long run, strategically, this might be worse for the U.S. than the current situation.”

Late last Friday, ZTE management sent an email to staff members updating them on the company’s efforts to reconcile with Washington.

“Even the longest road has an end,” the email concluded. “Even the longest night ends in day. Let us stay resolute and confident, and, full of hope, greet the coming dawn!”

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