ZTE Corp. executives are evaluating software options for the company’s smartphones after a U.S. technology ban threatened to cut off the operating system at the heart of its devices, a person with knowledge of the matter said.
The Android operating system, designed by Google, is the core of ZTE smartphones, powering user-facing functions, apps, and other services. That means the software likely falls under Monday’s U.S. government order denying China’s ZTE access to American technology for seven years. Trading in ZTE shares was suspended in Hong Kong soon after the announcement.
ZTE lawyers have been meeting with Google officials about the issue, according to the person. They asked not to be identified talking about private discussions. Google and ZTE declined to comment.
The U.S. order stated that ZTE can’t "participate in any way in any transaction involving any commodity, software or technology... exported or to be exported from the United States." That includes licenses, the typical way software is used.
Losing access to Android would be a major blow for ZTE because there are few alternatives. Microsoft Corp. and HP Inc. no longer offer smartphone operating systems, Apple’s iOS is exclusive to its own devices, and ZTE doesn’t have its own operating system. The only possible alternative is Samsung’s Tizen, which hasn’t taken off and only supports a few apps.
For Alphabet Inc.’s Google, losing ZTE as an Android handset maker wouldn’t be critical given the Chinese company’s small market share. However, Google has been losing control of what some Android handset makers put on their devices. Samsung, the largest Android manufacturer, has introduced its own mobile services, such as a voice assistant, that compete with Google services. In response, Google has relied more heavily on Chinese manufacturers like ZTE, Huawei Technologies Co. and Xiaomi Corp.