Chinese firm ZTE ends 'major operations' after USA export ban

Shanghai ZTE Corporation R&D Center

"Major operating activities of the company have ceased" as a result of the USA decision, it said in a filing Wednesday.

A May 1 formal request by ZTE to the US Commerce Department for an immediate stay of the April 15 ban went unheeded, according to a person familiar with the matter.

Ordering a denial may have been the Commerce Department's idea of playing hardball to force compliance. The export ban was placed on ZTE after the company violated US sanctions and sold goods and services to Iran and North Korea.

It's not exactly clear how Trump plans to help ZTE or what he's instructed the Commerce Department to do.

The Chinese company sells smartphones and telecommunications equipment around the world and was slapped with the seven-year export ban because the Chinese company lied to American officials about punishing employees who violated USA sanctions on North Korea and Iran.

ZTE, as one of the world's largest telecom equipment makers, relied on USA companies such as Qualcomm and Intel for components.

"President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast". The order was causing "irreparable harm" to the company and partners, as well as millions of consumers, including those who own its phones and major network operators, the person said.




At issue is that department's move last month to block the ZTE Corp., a major supplier of telecoms networks and smartphones based in southern China, from importing American components for seven years. By cutting off access to USA suppliers of essential components such as microchips, the ban threatens ZTE's existence, the company has said.

The US action could be devastating to ZTE.

Qualcomm last month said it expected lost sales to ZTE to lower its earnings by 3 cents per share in the current quarter. A ZTE spokesman also did not respond to an email seeking comment.

But U.S. officials said this year that ZTE didn't discipline all the employees involved in the violations.

ZTE, which makes telecoms equipment and handsets, is still "actively communicating" with the United States side "to facilitate the modification or reversal" of the ban and "forge a positive outcome", the filing said. The company's R&D expenditure a year ago stood at 12.96 billion yuan, which accounted for about 11.9 percent of the company's operating revenue.

Trading of its Hong Kong and Shenzhen-listed shares has been halted since the U.S. decision.

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