U.S. regulators vote 5-0 to rule Huawei, ZTE national security threat; American tech companies to face the heat

Two days after the Department of Justice exempted US companies and issued temporary licenses to a few, including Microsoft, to supply products to Huawei and its non-affiliates for 90 days, the U.S. Federal Communications Commission (FCC) on Friday voted 5-0, ruling Huawei and ZTE Corp as national security threats.

The decision was almost expected as U.S. lawmakers had given a hint late Thursday that they would urge White House to declare these Chinese companies as national security threats.

The voting comes at a time when Washington and Beijing are holding talks for a possible solution to the ongoing trade war between the world's two largest economies.

New restrictions imposed

Huawei YouTube Grab

The voting will now impose new restriction on subsidies for American tech companies. This is in a move to put a check on Chinese tech companies including Huawei and ZTE.

US Federal Communications Commission's new set of restrictions will bar American carriers of these Chinese tech firms from federal subsidies to purchase products from companies that will be on the new blacklist.

U.S. tech companies have been trying to tap the $8.5 billion government fund to buy equipment and other products from Chinese companies.

Huawei, ZTE continue to struggle in U.S.

The voting was also done to propose removal and replacement of equipment by all U.S. carriers of Huawei and ZTE. This could pose a severe blow to Huawei and ZTE's key business areas in the United States, which is telecom equipment.

Understandably, Huawei and ZTE could be the first to companies to be blacklisted. The decision is likely to be finalized in the coming weeks once the vote is officially entered in the Federal Register.

Regulators tighten noose on Huawei and ZTE

ZTE Corp YouTube Grab

Both Huawei and ZTE have been having a tough time operating in the United States. The 5-0 vote is a clear indication that U.S. lawmakers are in no mood to let loose Chinese tech companies operating in the United States.

Huawei said that the order was based on "irrational speculation" and urged the Federal Communications Commission to "rethink on the order". However, Huawei, ZTE and will get a 30-day window to contest the designation.

However, even if an order for complete removal of equipment is passed, it won't happen before 2020.