Cootek, the Chinese maker of TouchPal keyboard, files for $100M US IPO

Cootek, the Chinese mobile internet company best known for keyboard app TouchPal, has filed for a public offering in the United States. In its F-1 form, submitted last week to the Securities and Exchange Commission, Cootek said it wants to raise up to $100 million.

The Shanghai-based company began operating in 2008, when TouchPal was launched, and incorporated as CooTek in March 2012. In its SEC filing, Cootek said it currently has 132 million daily active users, with average DAUs increasing 75% year-over-year as of June. It also said it achieved 453% total ad revenue growth in the six month period before June.

While AI-based TouchPal, which offers glide typing and predictive text, is Cootek’s most popular product, it also has 15 other apps in its portfolio, including fitness apps HiFit and ManFIT and a virtual assistant called Talia. The company uses its proprietary AI and big data technology to analyze language data collected from users and the Internet. Then it uses those insights to develop lifestyle, healthcare and entertainment apps. Together, those 15 apps reached an average of 22.2 million monthly average users and 7.3 million daily average users in June.

TouchPal itself had 125.4 million daily average users in June 2018, with active users launching the app an average of 72 times a day. It currently supports 110 languages.

Most of Cootek’s revenue comes from mobile advertising. It says net revenue grew from $11 million in 2016 to $37.3 million in 2017, or 238.5% year-over-year, while its net loss dropped from $30.7 million in 2016 to $23.7 million in 2017. It achieved net income of $3.5 million for the six months ending in June, compared to a net loss of $16.2 million in the same period a year ago.

Cootek plans to be listed under the ticker symbol CTK on the New York Stock Exchange and will use the IPO’s proceeds to grow its user base, invest in AI and natural language processing tech and improve advertising performance. The offering will be underwritten by underwritten by Credit Suisse, BofA Merrill Lync and Citi.

SoftBank’s Vision Fund to help Chinese online insurance giant ZhongAn go international

SoftBank’s Vision Fund is backing Chinese online insurance giant ZhongAn through its latest investment, which could take the company — which has struggled for stability following a monster IPO last year — into international markets.

The Vision Fund announced today it has made an undisclosed investment in ZhongAn International, the global arm of the five-year-old company created by $200 billion insurance giant Ping An and internet firms Tencent and Alibaba. The ZongAn business is widely-heralded as China’s first digital insurance company. Its insurance products cover lifestyle, consumer finance, health, travel and automotive, and it went public last September in a Hong Kong IPO that raised $1.5 billion. ZhongAn International was created in December of last year to scout out overseas opportunities.

Despite impressive credentials and a trailblazing business, it hasn’t been smooth sailing.

Disappointing financial results — which center around hefty fees paid to online platforms that give it distribution — have seen the value of ZhongAn shares nosedive. The current price of HKD35.55 is down on the HK$59.70 IPO price, and a far cry from a peak HKD 93.65 back in October.

Aside from adding the support of a major name — SoftBank’s Vision Fund is easily the largest tech investment firm in the world, with a $90 billion-plus purse — this investment might give cause for optimism. Alongside the investment, ZongAn International is creating a new entity in partnership with SoftBank that will be dedicated to “exploring international opportunities.”

More specifically, SoftBank plans to use ZongAn’s technology and its network to expand to “multiple markets” in Asia, although it isn’t specific about which countries or a timeframe for the potential launches.

“We are pleased to announce this partnership which will allow us to explore new and innovative ways to serve more companies and customers outside of China. SoftBank is an important business partner and we believe this collaboration will significantly boost our technology solutions businesses,” said ZhongAn Online CEO Jeffrey Chen in a statement.

The deal, and joint entity, signifies a growing trend of SoftBank becoming operationally involved in investments with companies that are looking at overseas growth opportunities.

SoftBank inked a joint-venture with Chinese ride-hailing giant Didi Chuxing to launch a taxi-booking service in Japan. While it has also announced a JV to bring Indian payment service Paytm to Japan. Both companies are long-term investments for SoftBank, but SoftBank believes its experience and network can help them navigate international waters. The same thinking applies to the ZhongAn deal although it appears that the partnership is shooting for more than just Japan.

Tencent-backed news aggregation app Qutoutiao files for U.S. public offering

Qutoutiao, a news aggregator app backed by Tencent, has filed for an initial public offering of up to $300 million in the United States. In its F-1 form, the company, whose name means “fun headlines,” said it is the number two mobile content aggregator in China. Its main rivals are Jinri Toutiao, China’s top news aggregator, Tencent’s Kuaibao and Yidianzixun.

Based in Shanghai, Qutoutiao reportedly reached unicorn status in March, when it raised a Series B of about $200 million led by Tencent. For Tencent, Qutoutiao and Kuaibao represent opportunities to take market share away from Jinri Toutiao, which is owned by ByteDance. ByteDance is reportedly planning a Hong Kong IPO that could value it at over $45 billion.

In its SEC filing, Qutoutiao said that since launching in July 2016, it has achieved monthly average users of about 48.8 million and daily average users of about 17.1 million, with the average time users spend on the app each day totaling about 55.6 minutes in July 2018. To compete with Jinri Toutiao and other rivals, Qutoutiao targets users from China’s smaller Tier 3 cities. Despite increasing levels of disposable income, Qutoutiao says Tier 3 cities, many of which are located in the west of China, are still underserved markets.

Qutoutiao also said in its filing that its net revenues increased from RMB 58.0 million (about $8.8 million) in 2016 to RMB 517.1 million (about $78.1 million) in 2017, and from RMB 107.3 million (about $16.2 million) in the six months ended June 30, 2017 to RMB 717.8 million (about $108.5 million) in the same period in 2018.

The app uses an AI-based content recommendation engine to display articles and videos based on user profiles and plans to use money raised from its IPO to add more content offerings, increase monetization opportunities and look for acquisition and investment opportunities. Qutoutiao plans to list on Nasdaq under the ticker symbol QTT. The IPO will be underwritten by Citigroup Global Markets, Deutsche Bank Securities, China Merchants Securities and UBS Securities and KeyBanc Capital Markets.

Gaming in Asia may be crypto’s killer dApp

As money and talent flows into the crypto and blockchain worlds, a persistent question keeps coming up: what is going to be the “killer app” that drives adoption for these nascent technologies? The answer may well be quite simple: gaming in Asia.

That’s the theory for Cryptokitties, the notable purveyor of cute cats. The company has started expanding into China, Japan, and Korea as it attempts to capture a large market of gamer and crypto enthusiasts there, and it is building on the playbook pioneered by Uber when it launched in China in 2014.

Back in March, Andreessen and Union Square Ventures led a $12 million Series A round into Cryptokitties. A portion of that money went into Cryptokitties’ ambitions to expand into Asia. In fact, Cryptokitties’ largest user markets have been, and still are, the U.S. and China, followed by Russia.

For those unfamiliar with Cryptokitties, it’s often been alluded to as a digital version of Beanie Babies. Cryptokitties are virtual collectibles in the form of cute cats that can be bought, sold, collected and traded with cryptocurrency, with all the transactions listed on the blockchain. Owners who purchase these kitties can then breed them with other kitties to produce new baby kitties.

The company is part of Axiom Zen, the Vancouver and San Francisco-based design studio that originally built the game. Since its launch in 2017, Cryptokitties has also built a third-party app platform for crypto developers called the Kittyverse, open-sourced their digital asset licensing platform, and started a crypto gaming investment fund. The company currently has about 70 employees and is headquartered in Vancouver.

One of the main purposes why Cryptokitties raised venture capital was for geographical expansion. Having ample capital to not worry about cash flow as the company steps on the gas is certainly quite helpful. But as a business, Cryptokitties was already doing fine. Back in June when I was having a discussion with the company, Cryptokitties was already profitable starting in week three.

The company has successfully differentiated itself from many other crypto decentralized apps (dApps for short) companies out there by proving that they could make money first and have a sustainable user base. Jimmy Song from Blockchain Capital once said, you can make money three ways in crypto, and those are “selling mining machines, starting up Crypto exchanges, and organizing Crypto conferences.” Nonetheless, Cryptokitties was an outlier. With its newly raised money, the team was looking to deploy the capital for hiring, building out it’s Kittyverse, and expanding in Asia.

Asia and China has a Large and Untapped Crypto Gaming Market

Benny Giang, one of the co-founders of Cryptokitties, has been tasked with Cryptokitties Asia expansion since late 2017. Since then, the team has launched Cryptokitties in China, Hong Kong, and Taiwan. During the launch, in order to avoid another one of Ethereum’s network clogs like what happened in late 2017, the iOS app launch was initially limited to 5,000 new players, based on selected WeChat accounts.

Benny believes blockchain games in Asia are a huge untapped market but with increasing competition. Whereas the intersection of gaming and blockchain users is still pretty limited in the Americas, in Asia, that audience is significantly larger. This is primarily due to three reasons: 1) the awareness of cryptocurrency and blockchain is more prevalent in Asia, 2) the regulatory markets are more developed and sophisticated (for better or worse) in China, Korea, and Japan, and 3) there is a proportionally higher number of gamers in Asia than the U.S.

China is the biggest market in this intersection, but there have been challenges. As Cryptokitties launched and grew in the last year, the company saw competition and copycats (pun intended) from China moving quickly into the market. In the beginning of 2018, just as Cryptokitties was launching in China, Xiaomi, the mobile phone maker that recently IPO-ed on the Hong Kong Stock Exchange, launched their own crypto collectible called Cryptobunny. Baidu, the large search engine of China, also recently launched Cryptopuppy.

Go to Market Learnings from Uber in China – Identifying the Right Local Partners and Hires

As Benny and team began doing research on the Asia market, they realized that working in a market that’s twelve hours away is not easy. Taking some of its lessons from Uber’s experience in China, they decided that they needed to localize their go-to-market approach.

One of the reasons Uber ended up exiting the Chinese market was that it did not successfully build a product catered to Chinese citizens. Despite the large sum of money it was pouring into the Chinese market, Uber was still losing market share to Didi. Another suggested reason for the failure was that Uber should have gone to market with a local partner like Didi instead of going head to head with them. The Cryptokitties team knew that they wanted to expand correctly, and subsequently identified a local partner in China to target the market there.

In January 2018, Axiom Zen partnered with Animoca Brands to publish the Cryptokitties game on mobile in China, Hong Kong, and Taiwan. Animoca is a Hong Kong-based, privately-held developer and publisher of games, with a number of games using popular IP such as Garfield, Ultraman, and Doraemon. By working with Animoca, Cryptokitties was able to build out a localized website for its Chinese-speaking audience, provide native-speaker support services, and host numerous giveaway events.

In my discussion with him, Benny provided some insightful advice on go to market strategy in Asia. First, he mentioned that for a blockchain gaming company like themselves, it is best to find two local partners – one in blockchain and one in gaming – to help navigate the landscape. This kind of well-thought-out, go-to-market strategy requires hard work and local community understanding that very few cryptocurrency teams have achieved.

Currently, most Western crypto companies do not apply a traditional tech-oriented go-to-market strategy when trying to expand into other regions. Instead, most of them choose to leverage their “global communities.” They would incentivize these regional token holders to do local marketing and encourage them to find more token supporters and buyers in their region. Nonetheless, that type of marketing approach effectively identifies people who want to make a quick buck, rather than users who can sustain a platform.

Secondly, tasteful and culturally-appealing design is also very important when it comes to dApps. Cryptokitties originally differentiated themselves from other dApps by creating beautiful cats on the blockchain that immediately caught people’s attention. They have also decided to apply a similar local strategy in China.

Momo Wang is the creator of the highly popular Tuzki character, a black and white line drawing of a bunny that’s used widely across various instant messaging platforms, particularly WeChat .

The popular character Tuzki (Photo courtesy WeChat)

Cryptokitties hired Momo as a brand ambassador and contributor to the Artist Series to design kitties for them. By doing so, they are able to appeal to an audience who may have a different local taste.

Benny adds that it is essential for dApp companies to create beautiful websites and great user experiences that appeal to local communities. However, there are also cons when building beautiful websites for a blockchain company that is decentralized by nature. Smooth user interfaces in the form of a traditional website or an app fall under the jurisdiction of a traditional tech business. Internet companies in China, for example, require approval and licensing from the government to be able to operate and serve its citizens.

China has become the wild west of crypto and blockchain, and there will continue to be unforeseen obstacles. It certainly isn’t easy for Cryptokitties to be the first western dApp company to venture into China, but in the next five years, we’ll see a significant number of Western companies heading east – and these early learnings will be invaluable.

China is the fastest growing smart speaker market

No surprise that smart speaker sales are on the rise. That certainly comports with recent numbers from NPD. The latest report from Canalys, however, pulls the camera back a bit to give a better picture of the global market. Seems that while smart speaker sales continue to be hot here in the States, they’re positively on fire in China.

Global shipments increased by 187 percent year-over-year for a total of 16.8 million units. China accounted for 52-percent of the total growth worldwide, with Alibaba and Xiaomi accounting for 17.7 and 12.2 percent, respectively. The growth is large, in part, due to the fact that the category effectively didn’t exists a year ago.

Canalys’ Hattie He notes that a confluence of different elements have potentially put the country on track overtake the U.S.

“Alibaba and Xiaomi have both relied on aggressive price cuts to create demand,” He adds. “Both companies have the financial backing to spend on marketing and hardware subsidies in a bid to quickly build their user bases. Although the real level of user demand for speaker products is currently unproven, China is on its way to overtake the US in the near term. The challenge remains for local vendors to increase user stickiness and generate revenue from the growing installed base of smart speaker users.”

Also interesting is the fact that Google has maintained its top spot ahead of Amazon, with explosive growth year over year. Google’s up 449 percent to Amazon’s -14 — putting the two companies in first and second place, respectively. Of course, Amazon got a significant headset in the market, so Google has some ground to make up. Apple, meanwhile, failed to crack the top four.

Making way for new levels of American innovation

New fifth-generation “5G” network technology will equip the United States with a superior wireless platform unlocking transformative economic potential. However, 5G’s success is contingent on modernizing outdated policy frameworks that dictate infrastructure overhauls and establishing the proper balance of public-private partnerships to encourage investment and deployment.

Most people have heard by now of the coming 5G revolution. Compared to 4G, this next-generation technology will deliver near-instantaneous connection speed, significantly lower latency – meaning near-zero buffer times – and increased connectivity capacity to allow billions of devices and applications to come online and communicate simultaneously and seamlessly.

While 5G is often discussed in future tense, the reality is it’s already here. Its capabilities were displayed earlier this year at the Olympics in Pyeongchang, South Korea, where Samsung and Intel  class=”m_4430823757643656150MsoHyperlink”>showcased a 5G enabled virtual reality (VR) broadcasting experience to event goers. In addition, multiple U.S. carriers including Verizon, AT&T and Sprint have announced commercial deployments in select markets by the end of 2018, while chipmaker Qualcomm unveiled last month its new 5G millimeter-wave module that outfits smartphones with 5G compatibility.

BARCELONA, SPAIN – 2018/02/26: View of the phone company QUALCOMM technology 5G in the Mobile World Congress.
The Mobile World Congress 2018 is being hosted in Barcelona from 26 February to 1st March. (Photo by Ramon Costa/SOPA Images/LightRocket via Getty Images)

While this commitment from 5G commercial developers is promising, long-term success of 5G is ultimately dependent on addressing two key issues.

The first step is ensuring the right policies are established at the federal, state and municipal levels in the U.S. that will allow the buildout of needed infrastructure, namely “small cells”. This equipment is designed to fit on streetlights, lampposts and buildings. You may not even notice them as you walk by, but they are critical to adding capacity to the network and transmitting wireless activity quickly and reliably. 

In many communities across the U.S., 20th century infrastructure policies are slowing the emergence of bringing next-generation networks and technologies online. Issues including costs per small cell attachment, permitting around public rights-of-way and deadlines on application reviews are all less-than-exciting topics of conversation but act as real threats to achieving timely implementation of 5G according to recent research from Accenture and the 5G Americas organization.

Policymakers can mitigate these setbacks by taking inventory of their own policy frameworks and, where needed, streamlining and modernizing processes. For instance, current small cell permit applications can take upwards of 18 to 24 months to advance through the approval process as a result of needed buy-in from many local commissions, city councils, etc. That’s an incredible amount of time for a community to wait around and ultimately fall behind on next-generation access. As a result, policymakers are beginning to act. 

13 states, including Florida, Ohio, and Texas have already passed bills alleviating some of the local infrastructure hurdles accompanying increased broadband network deployment, including delays and pricing. Additionally, this year, the Federal Communications Commission (FCC) has moved on multiple orders that look to remedy current 5G roadblocks including opening up commercial access to more amounts of needed high-, mid- and low-band spectrum.

The second step is identifying areas in which public and private entities can partner to drive needed capital and resources towards 5G initiatives. These types of collaborations were first made popular in Europe, where we continue to see significant advancement of infrastructure initiatives through combined public-private planning including the European Commission and European ICT industry’s 5G Infrastructure Public Private Partnership (5G PPP).

The U.S. is increasing its own public-private levels of planning. In 2015, the Obama Administration’s Department of Transportation launched its successful “Smart City Challenge” encouraging planning and funding in U.S. cities around advanced connectivity. More recently, the National Science Foundation (NSF) awarded New York City a $22.5 million grant through its Platforms for Advanced Wireless Research (PAWR) initiative to create and deploy the first of a series of wireless research hubs focused on 5G-related breakthroughs including high-bandwidth and low-latency data transmission, millimeter wave spectrum, next-generation mobile network architecture, and edge cloud computing integration.

While these efforts should be applauded, it’s important to remember they are merely initial steps. A recent study conducted by CTIA, a leading trade association for the wireless industry, found that the United States remains behind both China and South Korea in 5G development. If other countries beat the U.S. to the punch, which some anticipate is already happening, companies and sectors that require ubiquitous, fast, and seamless connection – like autonomous transportation for example – could migrate, develop, and evolve abroad casting lasting negative impact on U.S. innovation. 

The potential economic gains are also significant. A 2017 Accenture report predicts an additional $275 billion in infrastructure investments from the private sector, resulting in up to 3 million new jobs and a gross domestic product (GDP) increase of $500 billion. That’s just on the infrastructure side alone. On the global scale, we could see as much as $12 trillion in additional economic activity according to discussion at the World Economic Forum Annual Meeting in January.

Former President John F. Kennedy once said, “Conformity is the jailer of freedom and the enemy of growth.” When it comes to America’s technology evolution, this quote holds especially true. Our nation has led the digital revolution for decades. Now with 5G, we have the opportunity to unlock an entirely new level of innovation that will make our communities safer, more inclusive and more prosperous for all.

Y Combinator is launching a startup program in China

U.S. accelerator Y Combinator is expanding to China after it announced the hiring of former Microsoft and Baidu executive Qi Lu who will develop a standalone startup program that runs on Chinese soil.

Shanghai-born Lu spent 11 years with Yahoo and eight years with Microsoft before a short spell with Baidu, where he was COO and head of the firm’s AI research division. Now he becomes founding CEO of YC China while he’s also stepping into the role of Head of YC Research. YC will also expand its research team with an office in Seattle, where Lu has plenty of links.

There’s no immediate timeframe for when YC will launch its China program, which represents its first global expansion, but YC President Sam Altman told TechCrunch in an interview that the program will be based in Beijing once it is up and running. Altman said Lu will use his network and YC’s growing presence in China — it ran its first ‘Startup School’ event in Beijing earlier this year — to recruit prospects who will be put into the upcoming winter program in the U.S..

Following that, YC will work to launch the China-based program as soon as possible. It appears that the details are still being sketched out, although Altman did confirm it will run independently but may lean on local partners for help. The YC President he envisages batch programming in the U.S. and China overlapping to a point with visitors, shared mentors and potentially other interaction between the two.

China’s startup scene has grown massively in recent years, numerous reports peg it close to that of the U.S., so it makes sense that YC, as an ‘ecosystem builder,’ wants to in. But Altman believes that the benefits extend beyond YC and will strengthen its network of founders, which spans more than 1,700 startups.

“The number one asset YC has is a very special founder community,” he told TechCrunch. “The opportunity to include a lot more Chinese founders seems super valuable to everyone. Over the next decade, a significant portion of the tech companies started will be from the U.S. or China [so operating a] network across both is a huge deal.”

Altman said he’s also banking on Lu being the man to make YC China happen. He revealed that he’s spent a decade trying to hire Lu, who he described as “one of the most impressive technologists I know.”

Y Combinator President Sam Altman has often spoken of his desire to get into the Chinese market

Entering China as a foreign entity is never easy, and in the venture world it is particularly tricky because China already has an advanced ecosystem of firms with their own networks for founders, particularly in the early-stage space. But Altman is confident that YC’s global reach and roster of founders and mentors appeals to startups in China.

YC has been working to add Chinese startups to its U.S.-based programs for some time. Altman has long been keen on an expansion to China, as he discussed at our Disrupt event last year, and partner Eric Migicovsky — who co-founder Pebble — has been busy developing networks and arranging events like the Beijing one to raise its profile.

That’s seen some progress with more teams from China — and other parts of the world — taking part in YC batches, which have never been more diverse. But YC is still missing out on global talent.

According to its own data, fewer than 10 Chinese companies have passed through its corridors but that list looks like it is missing some names so the number may be higher. Clearly, though, admission are skewed towards the U.S. — the question is whether Qi Lu and creation of YC China can significantly alter that.

China’s Didi beefs up its newly-independent car services business with an acquisition

A week after spinning out its driver services business and giving it $1 billion in investment capital, Didi Chuxing has added to it through an acquisition.

Xiaoju Automobile Solutions (XAS), which the Didi spinout is called, announced today it has bought Hiservice, a three-year-old company that provides after-service care for car owners using a digital platform.

The deal was undisclosed, but XAS said that Hiservice will be combined with its maintenance and repair division to form a new unit that’s focused on car-owner services such as maintenance, parts and components. That’ll be called Xiaoju Auto Care (小桔养车) for those of you who are keeping up with the names of these Didi subsidiaries.

That auto care business will be jointly run by Yinbo Yi, who had run Didi’s auto care business, and Hiservice founder Cheng Qian, Didi confirmed. The new business claims 28 physical maintenance centers across seven cities in Asia.

Didi’s move to create XAS, which removes an asset-heavy business from the core Didi books, is seen by many as a sign that the company plans to go public soon. Unsurprisingly, Didi isn’t commenting on that at this point. The company was last valued at $56 billion when it raised a $4 billion round late last year — it has since added a $500 million strategic investment from travel company Booking Holdings.

While it is organizing its China-based business, Didi has also spent this year expanding into new markets. It has launched in Mexico, Australia and Taiwan while it acquired Uber rival 99 in Brazil. It is also edging close to launching a taxi-booking service in Japan via a joint venture with SoftBank.

WeWork China rival Ucommune raises $43.5M more at a $1.8B valuation

Barely weeks after WeWork China raised $500 million, one of its main rivals is refueling its tanks too. Ucommune — the company formerly known as UrWork until a WeWork lawsuit forced a rebrand — announced its $43.5 million Series C round.

Beijing-based Ucommune’s new round was led by real estate-focused investment firms Prosperity Holdings and RK Properties. The company said the deal gives its business a $1.8 billion post-money valuation. to date, it has raised around $450 million from investors, according to Crunchbase data. For comparison, WeWork China has pulled in $1 billion overall since being spun out of WeWork’s global business one year ago.

Both investors are strategic, according to Ucommune. It said that its partnership with Prosperity, in particular, will help it expand its presence in Southeast Asia, where it has a presence in Singapore and an investment in Indonesia. While it will work with RK Properties to upgrade its existing office spaces, perhaps in the style of WeWork’s ‘Powered By We’ program.

In total, Ucommune claims to manage 160 locations in over 35 cities. That’s primarily China but outside of Asia its reach does include New York, London, Hong Kong and Taiwan, too.

News of this new funding comes one day after another Chinese co-working brand, My Dream, raised $120 million.

Three big names is nothing though, the field used to be comprised of dozens of players. Some have died out but the market has also seen plenty of consolidation. WeWork bought its closest rival Naked Hub in a deal reportedly worth $400 million. Meanwhile, Ucommune has made four acquisitions this year, including Workingdom for around $45 million this summer.

New defense bill bans the U.S. government from using Huawei and ZTE tech

U.S. government agencies will be forbidden from using certain components or services from several Chinese tech firms, including Huawei and ZTE. The ban was signed into law today by President Trump as part of the Defense Authorization Act and will go into effect over the next two years.

The bill covers anything that is a “substantial or essential component of any system,” as well as tech that is used to route or view user data. So even though it doesn’t mandate an outright ban on Huawei and ZTE products, it still means many government workers or contractors, or companies that want to do business with the government, will have to jettison much of their current technology. The Defense Authorization Act also directs U.S. agencies to allocate funding to companies that need to replace equipment as a result of the new bill.

Last month, ZTE struck a deal with the Commerce Department to lift a denial order that was put in place after it violated sanctions against North Korea and Iran. The denial order, barring ZTE from working with American suppliers, would have seriously damaged its business and was a major point of contention in the U.S.-China trade war.

Lawmakers on both sides of the political aisle opposed the deal and continue to view ZTE as a security threat, but Senate Republications abandoned an attempt to re-impose sanctions on the company last month, which paved the way for the less severe provision in the Defense Authorization Act.

TechCrunch has contacted Huawei and ZTE for comment.

Huawei and ZTE, in particular, have been singled out as national security threats by the U.S. since a Congressional report in 2012. But the ban also covers video surveillance and telecommunications hardware produced by Hytera Communications, Hangzhou Hikvision Digital Technology Company and Dahua Technology Company, all Chinese firms.