ZTE Continues to Wait for U.S. to Lift Ban
ZTE Corp. said it is still waiting for the Trump administration to lift a ban that is preventing the Chinese maker of telecommunications equipment and smartphones from buying crucial components from American companies.
The company memo is the first time the Shenzhen-based company has commented on efforts to lift the U.S. ban in the three weeks since it agreed to pay a $1 billion fine to settle the dispute. The company announced May 9 that it had ceased “major operating activities” as a result of the ban.
ZTE said in the recent internal memo that it has submitted as required a revised escrow agreement to the U.S. Commerce Department’s Bureau of Industry and Security as a final necessary step to have the ban lifted.
“The ban is still effective. We hope everyone will continue to maintain our compliance goals and wait for the restart” of company operations, ZTE said in the memo.
Notably, ZTE cited U.S. media reports on the $1 billion fine but not its progress in having the ban lifted.
The recent memo has been continuously displayed on big screens in the hallways of its headquarters.
ZTE was expected to deposit $400 million into an escrow account in a U.S. bank in the “next couple of days” as part of a settlement agreement reached on June 7 to regain access to the U.S. market, Reuters reported last week, citing a U.S. Commerce Department official.
The Commerce Department in April imposed a seven-year ban on U.S. companies’ doing business with ZTE because of the company’s conspiring to evade U.S. embargoes on Iran at the time by selling equipment to the country.
ZTE confirmed the settlement agreement on June 12. The agreement was expected to be effective within three days, a person close to the matter at ZTE told Caixin at the time.
In addition to paying the fine and establishing the escrow account, ZTE was also ordered to replace its senior management and its board within 30 days, according to the agreement.
ZTE is due to hold its annual meeting of shareholders in Shenzhen on Friday. Five non-independent director nominees are up for election at the meeting, all from affiliated companies that are shareholders of or have investment relationships with ZTE’s controlling shareholder.
Among the five candidates, Li Zixue, the general secretary of the Communist Party committee at Xi’an Microelectronics Technology Research Institute, is expected to become the new chairman of ZTE’s board, and Zhu Weimin, director of Shenzhen Zhongxing WXT Equipment Company Ltd., is expected to become ZTE’s new president, a person close to the matter told Caixin.
ZTE said the management overhaul won’t have a fundamental impact on the company’s current operations. The company aims to resume operations within two weeks of the ban being lifted, according to the internal memo.
The ban has brought ZTE’s factories to a standstill, and the company has been struggling to motivate its nearly 80,000 employees during the stoppage. The company has held some technology competitions in the research and development department, just to “let employees have something to do.”
ZTE’s stock has lost nearly 60% of its market value since the ban. The shares dropped by the Shenzhen market’s maximum daily limits for eight straight sessions after trading resumed on June 13.
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