Chinese telecom company ZTE ceases major operations
ZTE told investors in a filing through the Hong Kong Exchanges on Wednesday May 9, that “major operating activities of the company have ceased.”
This is a direct result of the exports ban that was placed on ZTE for the next seven years in April, because of non-compliance when ordered to fire employees who were illegally shipping United States equipment to Iran and North Korea. The company also agree to pay $1.2 billion in order to settle the case.
The U.S. Commerce Department calls it a denial of export privileges and it prevents companies in the United States from selling products to the Chinese based company. The company is still running as of right now. ZTE says that is “maintains sufficient cash and strictly adheres to its commercial obligations.” But the company is having difficulties trying to sell products and create new sources of income with product launches.
The main area the company is having trouble with because of the ban is the inability to get the Qualcomm processors that are in almost every modern smartphone.
It will be very difficult for the company to remain competitive, even if they were able to find non-American suppliers.
Both ZTE and the Chinese government are in negotiations to get the ban reversed. However, ZTE isn’t the only phone manufacturer being threatened by the U.S. Huawei is also under a ban because of security and spying concerns cited by the U.S. Department of Defense. The devices are unable to be sold on military bases.
No headway has been made on getting the bans reversed, but ZTE said it would announce any changes related to the banned status.
