May 10, 2018 01:49 AM

ZTE Halts Main Business Operations Following U.S. Ban

ZTE’s headquarters in the southern Chinese technology hub of Shenzhen. Photo: VCG
ZTE’s headquarters in the southern Chinese technology hub of Shenzhen. Photo: VCG

ZTE Corp.’s main business operations have ceased due to a ban imposed by the U.S. government last month, but China’s second-largest telecom equipment-maker is trying to have the ban modified or reversed, it said on Wednesday.

The ban, which forbids U.S. firms from supplying ZTE with components and technology, was imposed after ZTE was found to have violated U.S. export restrictions by illegally shipping goods to Iran.

“As a result of the Denial Order, the major operating activities of the company have ceased,” ZTE said in the exchange filings late on Wednesday.

“As of now, the company maintains sufficient cash and strictly adheres to its commercial obligations subject in compliance with laws and regulations,” it said.

As one of the world’s largest telecom equipment-makers — alongside Huawei Technologies Co. Ltd., Ericsson and Nokia — ZTE relies on U.S. companies such as Qualcomm and Intel Corp. for up to a third of its components.

Analysts have said it will be hard for ZTE to stay competitive even if it can find non-American suppliers.

Taiwan-based semiconductor company Mediatek said last week it had received a permit from the island’s government to continue to supply ZTE.

ZTE said it was actively communicating with the U.S. government “in order to facilitate the modification or reversal of the Denial Order by the U.S. government and forge a positive outcome in the development of matters.”

The ban that threatens to cut off ZTE’s supply chain came amid heightened tension over a possible U.S.-China trade war. The Chinese government raised the issue of ZTE last week with a visiting U.S. trade delegation.

ZTE said on Sunday it had submitted a request to the U.S. Commerce Department for the suspension of the ban.

ZTE appears to have suspended its online stores on its own website as well as on Alibaba Group Holding Ltd.’s e-commerce platform, Taobao, over the past few days, which display a “page being updated” message with no products to order.

The Chinese firm did not respond to calls and messages from Reuters seeking comment.

A ZTE employee told Reuters that employees had been reporting to work as normal but “with not much to do.” The employee, who declined to be named, said business trips had been halted.

Employees at ZTE’s headquarters in the southern Chinese technology hub of Shenzhen were reluctant to speak to reporters after the ban was announced, but some voiced concerns.

One employee said this was the “the biggest challenge” for ZTE since he joined 10 years ago. Another said he hopes the Chinese government will help, saying he was confident President Xi Jinping would “sort out this trouble.”

ZTE had settled the sanction case with the U.S. government in March 2017 after admitting to illegally shipping products with U.S. technology to countries that included Iran. ZTE paid a record fine of nearly $900 million. But last month, the U.S. government reactivated the ban after it said ZTE violated terms of the settlement and made repeated false statements, which ZTE disputed.


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