ZTE ceases 'major operations' following U.S. ban after failure to reverse

Nichole VegaMay 10, 2018

According to Reuters, ZTE has ceased all major operations following the United States export ban it faces, following a failure to have the ban reversed or modified.

Last month, the BIS banned American companies from selling telecommunications equipment and services to ZTE after the firm allegedly did not live up to the terms of an agreement that had been worked out after it illegally shipped telecom equipment to Iran and North Korea.

On Wednesday, May 9, ZTE announced in an exchange filings that it is ending major operating activities following the imposed ban by the Department of Commerce. "As of now, the company maintains sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations".

ZTE sent an internal memo to its employees stating that the firm has been "proactively communicating with relevant departments of the U.S government", according to the South China Morning Post. Without Qualcomm hardware, ZTE devices stand to lose their competitive edge, as they'll be forced to use chips made by MediaTek, as the only other alternative is Huawei-owned Hisilicon, who don't plan on releasing their SoCs for other companies. ZTE relies heavily on USA companies to supply as much as a third of its components.

US authorities imposed the penalty after discovering that Shenzhen-based ZTE had misled regulators involving the illegal shipments to the DPRK and Iran. It blamed a decision from the Commerce Department banning US businesses from selling to the Chinese firm, after it pleaded guilty to conspiring to sell technology to Iran in violation of USA sanctions.

The announcement comes days after ZTE said it had asked the Commerce Department's Bureau of Industry and Security to suspend the ban and had submitted extra information to bolster its case.

One employee said this was the "the biggest challenge" for ZTE since he joined 10 years ago.

The ban imposed on ZTE by the Department of Commerce makes it illegal for USA companies to sell any products and services to the company; but how did it reach this stage?

Last month, the US government reactivated the ban after it said ZTE violated terms of the settlement and made repeated false statements, which ZTE disputed.

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