Published: Sat, May 12, 2018
Money | By Armando Alvarado

Chinese firm ZTE ends 'major operations' after U.S. export ban

Chinese firm ZTE ends 'major operations' after U.S. export ban

The true cost of United States sanctions against ZTE is starting to emerge.

The denial order was initially imposed but automatically suspended in March past year on the condition that ZTE adhere to a settlement agreement which included penalizing the senior officials responsible for the decision to contravene the Iran sanctions.

This order prohibits USA companies, including ZTE's major suppliers such as Qualcomm and Google (for Android), from exporting their products to ZTE for a period of seven years. The firm pleaded guilty to the charges in March a year ago and was hit with $1.2 billion in fines.

ZTE, one of China's leading technology companies, has announced it will end "major operations", after the US government barred American firms from doing business with the telecom equipment maker. "As of now, the company maintains sufficient cash and strictly adheres to its commercial obligations subject in compliance with laws and regulations".

ZTE paid over $100 million each to Qualcomm Inc, Broadcom Inc, Intel Corp and Texas Instruments, the official said. The US move against ZTE is also a blow to American component makers like Qualcomm, Microsoft and Intel, who sell it billions of dollars worth of equipment every year.

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The fine could have been more than £900,000 (over $1 million), but Staley was given a 30 percent discount for settling at an early stage.

The Commerce Department ban on US suppliers exporting goods to the Chinese network equipment and handset maker was discussed when a delegation led by US Treasury Secretary Steven Mnuchin met with Chinese officials in Beijing last week.

American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE's equipment, which includes smartphones and gear to build telecommunications networks, analysts noted.

ZTE did not immediately respond to a request for comment. ZTE provides services for 100 million users in India, 300 million users in Indonesia, and 29 million users in Italy, the official said.

On Friday, Asia Times reported that the group might sell-off its successful smartphone business, according to the online site AAStocks Financial News with potential buyers including domestic rivals Huawei, Oppo and Xiaomi.

ZTE's troubles with the US government are also playing out amid broader fears of an ascendant Chinese tech industry.

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