ZTE sacked compliance officer before US sanctions, as row overshadows Qualcomm's bid to buy NXP

Chinese ant-trust regulators raise questions over Qualcomm's long-running bid to buy NXP Semiconductors

ZTE, the Chinese networking equipment company subject to tough US sanctions this week, is believed to have sacked Cheng Gang, its chief compliance and chief legal officer, just before the tough measures by the US government were announced.

The furore over the US ZTE sales ban could overshadow the regulatory scrutiny of Qualcomm's acquisition of NXP Semiconductors by antitrust regulators in China, with China's state-controlled press rallying behind the company.

According to Reuters, a source claims that ZTE removed the executive around a month before US officials announced a ban on the firm.

Earlier this week, the US Department of Commerce issued an embargo against ZTE, stopping US companies from selling hardware and software to it for seven years.

The embargo was imposed after the US claimed that ZTE failed to comply with the terms of an agreement over the busting of US sanctions against Iran and North Korea. That agreement had included a sales ban should ZTE fail to comply.

The severity of the punishment means that key suppliers, such as Qualcomm, won't be able to provide technology that ZTE relies on for its smartphones and networking equipment. It may even oblige Google to withdraw its licence to use Android from ZTE.

But the alleged removal of Gang in March indicates that the move by the US Department of Commerce was not unexpected.

Speaking to Reuters, the source said: "We had sensed something was wrong with Cheng's unexplained removal, but did not expect something so serious."

As a result of Cheng's removal, the source added that employees are now worried about their future at the company. However, the public attitude in China, according to Reuters, is generally sympathetic.

And the move by US authorities could have an unexpected side-effect on Qualcomm's ongoing bid to acquire NXP Semiconductors, which has been held up by China's antitrust authorities.

According to Bloomberg, China's Ministry of Commerce has demanded more concessions from Qualcomm in order to waive the deal through.

In particular, the Ministry is concerned about Qualcomm's plans for patent licensing, which could extend into technology for mobile payments and autonomous driving, which are also being developed by companies in China.

Gao Geng, a spokesperson for the Ministry, told Bloomberg: "The authority has talked with Qualcomm about how to reduce the negative impact on the market and has conducted market tests using the remedy plan from Qualcomm.

"An initial investigation shows Qualcomm's plan can hardly solve relevant problems."

He confirmed that Qualcomm is planning to refile an application for approval following discussions with Chinese regulators.

However, the official added: "We will continue to conduct a fair investigation and review according to the rules, including anti-monopoly law."