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>> A US move to punish China's ZTE might be hitting a little too close to home for one American company. On Monday, the US Department of Commerce slapped a seven year ban on sales to the Chinese telecom giant after the company failed to punish its employees for illegally shipping goods to Iran.
But now caught in the crossfire is America's own Qualcomm, who supplies chips for almost half of the 45 million smartphones sold by ZTE every year. Reuters' Adam Jordan explains more.>> Qualcomm is basically caught in the middle between Washington and Beijing. It's a US company with links and contracts with the US government and US military, but it makes a huge amount of the majority of its sales here in China to clients who use its IP and its patents for chipsets that go into phones and other devices are then sold all around the world.
On one side, it has to keep the US happy. It will have to obviously comply with this latest US ban on sales of products to ZTE. But at the same time, it needs to have support and favor here in China as well, where it operates and has so much business.
>> China is Qualcomm's most lucrative market, but with the new ban, loss of business could just be the start for the US firm>> In some ways, the timing of all this is petty tricky for Qualcomm. We have a brewing trade war between the US and China, especially where tech is seen as a very sensitive area of this competition between the two countries.
And so what this latest move means is that, one directly Qualcomm is gonna lose their revenue source, a client in China that it can no longer sell to. It will potentially bolster its rivals who can step into fill the bridge. And third, of course, it puts Qualcomm in the firing line, because this will be seen politically as the US targeting ZTE, a Chinese firm.
In response, China may very well look to strike back. It's not impossible that we will see some sort of retaliation against US firms, of what that could be Qualcomm.>> On Tuesday, China's commerce ministry said it will closely monitor the situation on ZTE, and be prepared to take action to protect Chinese companies interests.