Australia's biggest telco, Telstra, yesterday said it would stop selling 22 co-branded ZTE devices as there was no guarantee that supplies would continue, given that ZTE had announced it was ceasing its main business activities in the US, an act that was likely to have ripple effects.
The blocking out of ZTE means that if the US authorities next decide that Samsung is a security threat — based on evidence that others are not allowed to see — then that company will have to pull out of the US as well.
ZTE was, until a couple of days ago, the fourth biggest seller of smartphones in the US, behind Apple, Samsung and LG. Not by virtue of making spectacular phones, but by catering to many niche markets.
Last month, the US Department of Commerce imposed a seven-year ban on ZTE acquiring components from US companies - on which it depends to manufacture its products - because of false statements made by the company during talks in 2016 over a charge of shipping telco equipment to Iran and North Korea.
As a penalty, US firms cannot sell parts to ZTE for seven years.
ZTE, incidentally, is one of four companies that has the resources and staffing to build 5G networks; the others are Ericsson, Nokia and Huawei. This case may seem clear-cut. But the US is also pursuing Huawei, claiming that it is a danger to national security, with not a shred of evidence to show.
Given that, one cannot help but think that this has more to do with controlling trade with China, rather than anything else.
As the ZTE ban will also affect American companies, it seems like the US is cutting off its nose to spite its face. The ban, will, however clear the way for AT&T and Verizon to dominate the 5G field in the US.
And it will give Cisco some respite from competition as the company that once dominated networking struggles to compete in the face of the rise of software-defined networking that has been eating into its profits.
Over the years, technology firms have become increasingly dependent on inputs from multiple countries to build their products. Coding, hardware manufacture, chips, memory, screens for smartphones, you name it – if supply from one company is cut off, then the cascading effect can be felt by many other companies across the globe. It only takes a fire at one memory factory in Taiwan for prices to rise across the world.
Globalisation has gone too far to be simply yanked back; you can't unscramble an egg without some real shocks to the system.
So which company will the US target next? And what about its acolytes like the other four of the so-called Five Eyes countries – the UK, Canada, Australia and New Zealand? Will they start toeing the Washington line? The UK has only gone as far as warning against the use of ZTE equipment in British telecommunications infrastructure.
No matter what happens next, one thing is very clear. China will move to ensure that it is self-sufficient as far as electronic components go, so that there cannot be a repeat of this incident.
And next time, the political fallout will be much greater.