SHANGHAI/BEIJING (Reuters) - A move by the United States to ban American firms selling components to the Chinese telecom equipment maker ZTE Corp will also hit a target closer to home: Qualcomm Inc, a U.S. company that is a major supplier of chips for ZTE’s phones.
The U.S. Department of Commerce slapped a seven-year ban on sales to ZTE on Monday for breaking terms of an agreement reached last year after it was caught illegally shipping goods to Iran.
Caught in the crossfire is Qualcomm, whose products account for the lion’s share of chips inside ZTE smartphones. The Chinese company shipped an estimated 46.4 million phones last year, according to IHS Markit.
“If you look at ZTE it sells around 45 million smartphones per year globally, and almost half of them have Qualcomm chips,” said Neil Shah, research director at Counterpoint Research.
“So if you look at an average of 25 dollars per chip set that’s close to half a billion dollars in revenue.”
Canalys, a technology consultancy, estimate that a higher 65 percent of ZTE phones contain Qualcomm chips.
Loss of business could be just the start for the U.S. company, which had sales of $22 billion last year. As Washington and Beijing square off with threats of tariffs and trade barriers, Qualcomm is a clear target for retaliation.
Technology is the crux of the tensions.
China wants to boost domestic champions like Huawei, which also makes chips. The United States, meanwhile, concerned about China’s growing might, has shot down Chinese technology deals overseas, citing national security concerns.
That puts Qualcomm, which makes the bulk of its