Thursday, 24 May, 2018

ZTE paid USA tech firms US$2.3bn for parts, report

A salesperson stands at counters selling mobile phones produced by ZTE Corp. at an appliance store in Wuhan in central China's Hubei province in a file ZTE paid USA tech firms US$2.3bn for parts, report
Heather Davidson | 14 May, 2018, 00:29

US President Donald Trump has said he wants to help save ZTE, one of China's biggest telecoms companies.

Somewhat bizarrely, Trump cited a loss of jobs in China as a motivating factor.

Days after China's second largest telecom gear maker ZTE Corp. was slapped with intense U.S. sanctions that block American companies from selling components to the telecom equipment maker for seven years, now the U.S. President Donald Trump has had a change of heart.

In 2016 the Obama administration announced that it was punishing the company for its alleged sanctions violations by restricting the sale of key USA exports to ZTE, but weeks later it suspended the punishment after the telecom equipment maker agreed to work with US authorities.

ZTE pleaded guilty a year ago to conspiring to violate U.S. sanctions by illegally shipping USA goods and technology to Iran and entered into an agreement with the United States government. "Commerce Department has been instructed to get it done!"

"As a result of the (US-imposed) Denial Order, the major operating activities of the company have ceased", ZTE said in regulatory filings late on Wednesday. USA companies are banned from exporting goods to ZTE, making it hard for the phonemaker to manufacture new products or update older ones.

Spokesmen for Zinke and Pompeo didn't immediately respond to a request for comment sent outside normal business hours.

"We are concerned that if ZTE is not ultimately punished for its reported misconduct, American export control laws and global efforts to promote human rights in Iran will be weakened", according to the letter, which was signed by Pompeo, Zinke and 21 other Republican House members.

Qualcomm last month said it expected lost sales to ZTE to lower its earnings by 3 cents per share in the current quarter.

Against that background, the Trump administration has barred military and government employees from using smartphones from ZTE and fellow Chinese maker Huawei.

ZTE has asked the department to suspend the seven-year ban on doing business with U.S. technology exporters.

The ban also hurts ZTE's ability to provide services, such as repairs to infrastructure, to customers in other countries and regions in which it operates.

For instance, MTN, a South Africa-based wireless carrier with 220 million customers throughout Africa and the Middle East, said the possibility ZTE would collapse forced the carrier to develop contingency plans.

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