The United States Congress still wants to make an example of ZTE over its violations of stateside trade sanctions imposed on North Korea and Iran. Much to President Trump’s protests and efforts to stop the resistance to a new settlement with China-owned company, the lifeline deal announced earlier this month is currently facing bipartisan opposition from Capitol Hill, though American lawmakers are still unlikely to be able to do anything without two-thirds of them agreeing to a solution through a supermajority vote that would override a presidential veto, something the President would almost certainly use to stop any new anti-ZTE initiatives from being pursued by the legislators.
Between U.S. disagreements over how to deal with ZTE and what’s turning into a full-blown trade war against China sits Qualcomm, one of the most important players in the smartphone industry whose chips power the vast majority of popular devices sold in the West. Qualcomm has been trying to gain China’s approval for its acquisition of Dutch NFC pioneer NXP Semiconductors since late 2016 without much success, and while many analysts believe that green light hinges on Washington and Beijing’s relationship stabilizing, the tensions between the two are still on the rise. Qualcomm’s Washington lobbyists successfully deterred a hostile takeover attempt from Broadcom on national security grounds earlier this year, with President Trump putting the end to the corporate power struggle with a cease-and-desist order sent to the then-Singapore-incorporated semiconductor firm.
Several months later, national security concerns are precisely what may kill Qualcomm’s chances of completing its largest acquisition ever valued at $44 billion; both Democratic and Republican lawmakers continue to insist ZTE represents a threat to the national security interests of the U.S. and see its trade sanction violations and subsequent settlement non-compliance as reasons enough to kill the company for good even as that move would likely spell an end to Qualcomm’s hopes of acquiring NXP. That state of affairs may lead the chipmaker to attempt lobbying for ZTE to be cut some regulatory slack this summer as part of an unconventional policy reversal, some industry watchers speculate.
ZTE already applied for a $10.7 billion credit plan and is planning major management and board changes as part of its new settlement with the Commerce Department which includes a $1 billion fine but if the firm’s denial order is reinstated, that turn of events would effectively spell is death mere months after its market cap hovered around the $20 billion mark. Under the original sanction, ZTE was barred from obtaining any kind of American technologies — including a Google-approved version of Android and Qualcomm’s chips — over a seven-year period. The publicly traded ZTE is majority-owned by the People’s Republic of China through a state-backed enterprise and hence isn’t expected to attempt improving its management transparency, which is an issue that also prevented Huawei from operating in the U.S. on any significant scale. The company’s new settlement also saw it vow to import $70 billion worth of additional American goods, with some industry watchers suggesting it should also attempt a major stateside entry, i.e. push to create American jobs to generate more goodwill from Capitol Hill.