This ban is expected to affect ZTE and its stock drastically as it depends on companies like Qualcomm (QCOM), Microsoft (MSFT), Intel (INTC) and Dolby for components. The loss of Qualcomm, in particular, will hurt ZTE badly as it leaves the latter with fewer alternatives for devices. ZTE gets around 25% to 30% of its components from US companies.
Before ZTE, it was Huawei that faced the wrath of the US government over telecommunications infrastructure security risks and espionage worries. Companies like Verizon and Best Buy decided to stop sales of Huawei products.
The stocks of major ZTE suppliers in the US, such as Acacia Communications Inc., dropped along with optical companies such as Lumentum Holdings Inc. and Finisar Corp.
The US is not alone in penalizing ZTE. The National Cyber Security Centre in the UK. has warned telecom companies against using ZTE’s equipment or services owing to national security risks.
The ban is likely to worsen the current trade situation between the US and China and also to be detrimental to ZTE both on a short and long-term basis.