ZTE may have been on the verge of bankruptcy just several months back but after escaping the death grip of the United States Department of Commerce, the company is returning to the mobile segment in an extremely aggressive manner, having just announced plans to launch its first 5G-ready smartphone in a matter of months. Even though the now-overturned denial order from Washington made the firm lose months of precious research and development time at a time when the vast majority of the industry is also racing to embrace the fifth generation of mobile networks, ZTE believes it's still capable of winning that contest, at least in the sense that it preserved its shot at becoming the first company in the world to offer both 5G networks and client-side devices - (Android) smartphones.
No way to go but up
Following arguably the worst period in its 34-year history that saw its very existence threatened, ZTE now appears to believe there's no way to go but up. The company hence resumed its 5G project late last year following the completion of one of the world's first handset prototypes capable of communicating with the new wireless standard which it disclosed last April. Shortly following that milestone, ZTE found itself on the receiving end of a seven-year denial order preventing it from purchasing and licensing American technologies as punishment for its inability to comply with the terms of a 2017 settlement with the Commerce Department over broken trade embargoes imposed on North Korea and Iran. The development caused an unprecedented crisis at the company, grinding its operations to a halt and prompting massive layoffs. It wasn't until pressure from China's communist government which controls ZTE through a majority stake prompted U.S. President Donald Trump to personally demand another solution to be found. The move that the current stateside administration described as "a personal favor" to Chinese President Xi Jinping which was meant to provide Washington with additional leverage in its trade negotiations with the Far Eastern country, a cause of major international tensions which continues to this date. The move proved to be unsuccessful so far seeing how the U.S. and China ended up being embroiled in a large-scale trade war that's currently on hold following a 90-day truce agreed at a G20 summit in Argentina in late November.
Instead of the crippling denial order, the Commerce Department agreed to let ZTE off the hook in exchange for a $900 million fine, another $400 million escrow payment, a complete revamp of its board and management, and a broad range of other concessions, including a pledge to import more American technologies in the near term, as well as a new fund financing an independent committee meant to audit its trade practices over the next decade. The former ZTE leadership largely described the new deal as disastrous and almost equally crippling as the old sanction which itself was criticized by the firm as unjust seeing how it was issued in response to a self-reported omission and not an intentional act of defiance. Several months back, ZTE took out a $10 billion loan meant to help it revive its operations in the immediate aftermath of the Commerce Department episode and now appears to be ready to return to its previous target markets in full force.
But concerning questions remain
Despite its renewed ambitions in the context of mobile innovations, it's presently unclear who outside of China would even want to embrace 5G technologies developed by ZTE. Prior to its latest clash with the Commerce Department, the company did score some 5G supply contracts with wireless carriers from Western countries such as Italy but all of those deals are now facing renewed scrutiny. Its stateside plans are almost meaningless at this point seeing how last year's spending bill outlawed the use of its telecom solutions by federal agencies and new reports suggest those very same products and service may soon also be banned in the American private sector by way of another executive order from the White House. Given that state of affairs, despite being one of the wireless pioneers that greatly contributed to the 3GPP's 5G New Radio standard that's now poised to serve as the basis for the next mobile revolution, ZTE's efforts in the space may ultimately end up being unrewarded.
Violated trade sanctions notwithstanding, much of the distrust the company is currently enduring from the U.S. and its allies comes down to the fact that it's majority-owned by a Chinese state firm and is consequently being painted as a massive security risk. While ZTE repeatedly dismissed those allegations as ill-intended and frivolous, many members of the global intelligence community previously argued that even if the tech giant had a perfect track record when it comes to cybersecurity, the cusp of the issue comes down to the fact that the current legislative framework in China allows the communist government to easily compel the company into spying on its foreign customers or compromising them in other ways with essentially no justification. Huawei is presently being blocked from doing large-scale business in the U.S. for similar reasons and neither company can do much to fight back that distrust, especially given the current tensions between the two largest economies on the planet.
Hoping for the best
Given the current situation, ZTE appears to be keen on embracing Huawei's strategy and just focusing on its technology while hoping for the best. The company is hence set to update both its Axon and Blade lineups of Android smartphones later this year, in addition to pursuing 5G devices and networks. It's likely to share more details on its near-term plans next month as Mobile World Congress is scheduled to start on February 25 and the Shenzen-based firm traditionally had a significant presence at the Barcelona, Spain-based trade show. In the meantime, the rest of the industry is also preparing to fully embrace the next generation of wireless, with Qualcomm's Snapdragon 855 alone being set to power over 30 5G-ready Android handsets released over the course of this year. 5G is also one of the major themes of the currently ongoing CES 2019 in Las Vegas, though most details on the industry's actual rollout plans have yet to be released.