The US Department of Justice (DoJ) opened an investigation into whether Chinese equipment manufacturer Huawei violated US restrictions on trade with Iran.
A criminal probe was initiated after the country’s Department of Commerce and Department of the Treasury called Huawei to account regarding similar issues, The Wall Street Journal reported.
While Commerce and Treasury officials can levy regulatory punishments on the company, Huawei could face criminal penalties if the DoJ determines it intentionally broke US laws.
Scrutiny from Washington is nothing new for Huawei. For years, the company had been the subject of suspicion from US officials, who accused it of spying and deemed it a threat. Political pressure blocked Huawei’s bid to secure smartphone supply deals with US operators AT&T and Verizon, while in March retailer BestBuy also dropped the company’s devices.
Recent action at the Federal Communications Commission also threatens to remove Huawei’s tiny foothold in the US equipment market by blocking smaller operators from using government funding to buy its products.
What could happen
ZTE provides a case study of just how much worse things can get for Huawei.
In 2017, ZTE pleaded guilty to charges it illegally shipped US goods to Iran in violation of trade sanctions and was fined nearly $1 billion as part of a settlement agreement. But earlier this month, the US banned domestic companies from selling components to ZTE for seven years after it found the vendor violated the terms of its settlement deal.
The ban threatens ZTE’s business across the board. However, it could have a particularly outsized impact on the company’s handset division as it will not only block access to key hardware from companies including Qualcomm, but perhaps also Android software from Google which serves as a core technology in ZTE handsets.