Published: Fri, May 11, 2018
Economy | By Shawn Conner

ZTE teeters as U.S. ban hits operations

ZTE teeters as U.S. ban hits operations

The announcement comes less than a month after the United States banned American firms from selling hardware and software to ZTE for seven years, effectively cutting off the company's supply chain.

The impact of the U.S. denial order preventing ZTE from doing business with any USA companies has been made brutally clear in a ZTE investor filing.

ZTE's shares have been suspended since the order was issued, but those of its non-U.S. suppliers, such as Mobi Development Co. and Shenzhen SDG Information Co., are down around 1% on the news that it is ending major operations.

ZTE claims it maintains "sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations". "The conclusion is more a concern that relies on the negotiation amid China and the US", he added. Last month, the US Commerce Department blocked US firms from selling parts or providing services to ZTE until 2025.

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China's second-biggest telecom equipment maker after Huawei, is facing a death sentence. "It's certainly going to make it very hard for them to produce and will have a potentially significant short- and long-term negative impact on the company", said Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE.

In an exchange filing late on Wednesday, ZTE said that last month's Denial Order has forced the company to cease operations.

Beyond the company's executives and employees, the denial order also categorised any "representatives" or "agents" as falling under the ban that prohibited participation "in any way in any transaction involving any commodity, software or technology exported or to be exported" from the US.

Boost Mobile Australia, which sold the Boost Zume 5 (a re-badged ZTE smartphone), has also pulled the product page for that device from the company's website.

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We've reached out to ZTE for further comment on the matter. Then, to hide its activities, ZTE allegedly lied and deleted emails to cover its tracks and actively sought to resume shipments during the investigation.

Upon pleading guilty to conspiracy to unlawful export, obstruction of justice, and making false statements to federal investigators, it appeared ZTE was committed to making a positive change.

The ban on USA sales to the firm arose from its skirting of United States export controls by selling to banned countries like North Korea and Iran with employees documenting how to evade American oversight.

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