Finance

Things are looking bleak as ZTE ceases main business operations

Things are looking bleak as ZTE ceases main business operations

"The major operating activities of the company have ceased", ZTE, which has 75,000 employees and recently ranked as the fourth most popular smartphone maker in the USA, wrote (PDF) in a Wednesday announcement to stock market traders in Hong Kong.

ZTE said in its filing it maintains "sufficient cash" and is "actively communicating" with the U.S. for a modification or reversal of the order, issued by the United States commerce department over violations of a previous settlement regarding illegal sales of ZTE phones and equipment to Iran.

Saying it has improved its compliance, ZTE has asked for a stay on the ban and supplied supplemental data bolstering its case to the Commerce Department.

ZTE's announcement states that the company has sufficient cash to remain in business "as of now", and is actively seeking a modification or reversal of the denial order from various U.S. government departments.

"ZTE's false statements only were reported to the U.S. Government after BIS requested information and documentation showing that employee discipline had occurred".

Telstra has said it is ceasing sales of Telstra-branded ZTE mobile and mobile broadband devices throughout its stores and partners following a move by the United States Government banning U.S. firms from supplying the Chinese device maker with components and technology.

ZTE got hit with a fine of nearly $900 million past year for evading the embargo on telecom equipment exports to Iran, by using US components in devices that it sold there.




Selected Telstra-branded mobile devices now unavailable: Due to issues outside of our control, certain Telstra-branded mobile phones and mobile broadband devices made by ZTE are now unavailable.

The ban on sales to ZTE has also highlighted China's heavy dependence on semiconductor imports between growing trade stress with the US.

As a result, the USA issued its denial order, forbidding ZTE from buying chips from companies such as Intel (intc) and Qualcomm (qcom), and optical components from Lumentum. The penalties prescribed by the U.S. Commerce Department included withholding bonus checks and issuing letters of reprimand to those involved. The Chinese government raised the issue of ZTE last week with a visiting US Trade Delegation.

This followed the revelation that ZTE had flouted a United States order by shipping US-made components to Iran and North Korea in 2017.

ZTE, one of the world's largest telecom equipment makers, may be the first major casualty of a trade war brewing between China and the US.

We'll keep you posted as this situation continues to unfold.

"We are hopeful that ZTE will be able to reach a resolution to this matter soon so that we can recommence selling Telstra-branded ZTE devices", the Telstra executive wrote. The employee, who declined to be named, said business trips had been halted.


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