ZTE says assessing implications of United States decision

Saul Franklin
April 17, 2018

"This egregious behavior can not be ignored". Pittenger is sponsoring legislation that would strengthen the US national security review process for foreign investments.

As U.S. concerns about safeguarding its chip technology and cutting its trade deficit grow, the tech sector has become a flashpoint in the broader battle about trade and economic policy, with U.S. President Donald Trump accusing Chinese firms of intellectual property theft for years.

China's Ministry of Commerce said it would take the necessary measures to protect the interests of Chinese businesses. It said the Shenzhen-based company has cooperated with hundreds of US companies and contributed to the country's job creation. However, last month, the company admitted it had not taken action against the 35 additional members of staff by fining or otherwise reprimanding them.

Shares in optical networking equipment maker Acacia Communications Inc, which gained just under a third of its total 2017 revenue from ZTE, tumbled 35 percent.

Thanks to the order, ZTE will be banned from purchasing crucial American technologies vital for its operations.

"All hell breaks loose", wrote Edison Lee and Timothy Chau, analysts at Jefferies, after the export ban was announced. Its shares were last traded at HK$25.6 at the close in Hong Kong on Monday.

ZTE faces tough options in particular due to the ban on buying Qualcomm's processors and modems, the main components in smartphones. The technology bought by the company includes components central to its products.

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The government's capture of Douma, the last town held by the rebels in eastern Ghouta, marked a major victory for Assad. She added: "It's some of the worst piece of fake news we've yet seen from the Russian Federation propaganda machine".

ZTE said it was aware of the sanctions and is evaluating its impact while talking with related parties. Qualcomm was not immediately available to comment. To add to the woes, the Britain's National Cyber Security Centre (NCSC) has written to United Kingdom telecoms providers warning them that the use of ZTE's equipment and services could pose a national security risk, the BBC reported.

Having suffered a loss of 767.8 million Chinese yuan ($122 million) in 2016, ZTE bounced back with a net profit of more than RMB6.7 billion ($1.1 billion) a year ago, with sales up 7.5%, to RMB108.8 billion ($17.3 billion).

The Chinese telecommunication-gear makeup ZTE Corp was found violating the terms of sanction settlement. It was the largest criminal fine for the Justice Department in an export control or sanctions case.

On Monday (16 April), a senior U.S. commerce official told the FT: "The timing of this is somewhat unfortunate because it could make it seem like they are connected". The company is making personnel changes and instituting new compliance procedures, he said.

According to the BBC, the US House Intelligence Committee had previously warned that both ZTE and another Chinese firm, Huawei, posed security threats. "Huawei is closely associated with the Chinese government, and Huawei and ZTE strongly dislike each other".

"If they can't operate normally because of the USA export ban, that will clearly impact global and Chinese network construction and could affect future 5G rollouts", CICC analysts including Wang Xinglin wrote in a research note Tuesday.

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