The US has officially designated Huawei and ZTE as threats to national security, blocking American companies from spending federal subsidies on their equipment.
Ajit Pai, chairman of the Federal Communications Commission, announced the designation on Tuesday, repeating claims the companies have close ties to the Chinese Communist Party and China’s military and pose a risk to America.
Mr Pai stressed that both companies were subject to China’s National Intelligence Law of 2017, which could oblige them “to co-operate with the country’s intelligence services”
“We cannot and will not allow the Chinese Communist Party to exploit network vulnerabilities and compromise our critical communications infrastructure,” Mr Pai added.
The designation prohibits US companies spending money received from the country’s $8.3bn (£6.7bn) universal service fund, which is designed to subsidise internet access for under-connected areas, on equipment produced by either company.
Both Huawei and ZTE have denied covertly operating on behalf of the Chinese state and point out that no evidence has been presented that they have done so.
The designation follows new sanctions in the US targeting Huawei which would prevent the company from using any computer chips designed by American firms, and not just those manufactured there.
Huawei warned the move might put it out of business. Almost all semiconductors on the market – which are essential across the whole of Huawei’s product line, from radio base stations to servers and smartphones – contain US intellectual property.
The sanctions have forced the UK to reassess its decision to allow Huawei equipment a limited role within the country’s 5G network.
Boris Johnson had in January made the decision to allow the company’s equipment a limited role, of no greater share than 35%, within the non-core parts of the UK’s network.
“Following the US announcement of additional sanctions against Huawei, the NCSC is looking carefully at any impact they could have to the UK’s networks,” a spokesperson confirmed to Sky News.
Foreign Secretary Dominic Raab said on Wednesday this review was ongoing.
Both Huawei and ZTE have been scrutinised by Western government agencies for many years due to the potential cyber security risks which their equipment might introduce into telecoms networks.
A congressional report investigating the companies, published in 2012, recommended that the US “view with suspicion the continued penetration of the US telecommunications marker by Chinese companies” due to fears that Beijing could use their equipment for espionage or to conduct cyber attacks against America.
President Trump’s administration has had multiple arguments with Beijing, imposing tariffs on trade in 2018 before signing a trade deal in January 2020, and blaming China for the coronavirus outbreak.