Microwave Journal

China's ZTE Corp Says Main Business Operations Cease Due to US Ban

May 9, 2018

ZTE Corporation's main business operations have ceased due to a ban imposed by the U.S. government, but China’s second biggest telecom equipment maker is trying to have the ban modified or reversed, it said on Wednesday. ZTE was hit by a ban last month from Washington, forbidding U.S. firms from supplying it with components and technology after it 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.

The U.S. action, first reported by Reuters, could be devastating to ZTE. As one of the world’s largest telecom equipment makers, along with Huawei, Ericsson and Nokia, ZTE relies on U.S. companies such as Qualcomm and Intel for up to a third of its components. Analysts have said it would be hard for ZTE to stay competitive, even if it could find non-American suppliers.Taiwanese semiconductor company Mediatek said last week it had received a permit from the Taiwanese 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.” ZTE said on Sunday it had submitted a request to the U.S. Commerce Department for the suspension of the ban.

The ban that has 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 settled the initial sanction case with the U.S. government last March (2017), after admitting to illegally shipping products with U.S. technology to countries, including Iran. It paid a record fine of nearly $900 million. 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 has disputed.

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