Published: Tue, April 17, 2018
Tech | By Amelia Peters

ZTE Is Banned From Purchasing Components Made By US Suppliers

ZTE Is Banned From Purchasing Components Made By US Suppliers

The U.S. has sanctioned China's second-largest maker of telecom equipment for breaching a settlement of allegations that it illegally shipped goods to Iran.

"We stand ready to take necessary measures to protect Chinese companies' legitimate rights and interests", it added. In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR).

Denying ZTE export privileges prevents the company from "participating in any way in any transaction" subject to the USA government's Export Administration Regulations, which govern sales of sensitive technology overseas.

ZTE has suspended trading in Hong Kong and Shenzhen as a result of the bans imposed by the USA and the UK.

The company has set up a crisis management group in response to the ban, said a ZTE source, declining to be identified as the information was confidential.

Secretary of commerce Wilbur L.Ross Jr said: "ZTE misled the department of commerce".

But instead of punishing those involved, "ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand", the Commerce Department said in a statement. ZTE, they say, has refused to discipline the employees responsible as per the agreement.

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Saying ZTE was likely to miss shipments and lose orders, brokerage Jefferies downgraded its rating on the firm to "underperform" from "buy" and slashed its price target to HK$15.72, almost 40 percent below the firm's closing price prior to Tuesday's trading halt.

Under terms of the ban, US companies can not export prohibited goods, such as chip sets, directly to ZTE or via another country, beginning immediately. -China tensions over trade between the world's two biggest economies.

Seemingly in tandem with the US BIS announcement, the UK's National Cyber Security Centre issued an advice statement to the United Kingdom telecommunications sector highlighting the potential national security risk from using ZTE equipment or services can not be mitigated.

"China does not play by our rules, and we must be vigilant against Chinese threats to both our economic security and national security", said Republican Representative Robert Pittenger after the Commerce announcement.

Intel, Microsoft, Qualcomm and Micron Technology are also among USA suppliers to ZTE, according to data compiled by Bloomberg. Qualcomm was not immediately available to comment. ZTE has purchased chips from Qualcomm Inc. Acacia said it was suspending affected transactions and assessing the impact.

Shares of Finisar Corp.

ZTE's main business is networking equipment where they are a major player alongside other mentionable companies such as Nokia, Ericsson, Huawei and Cisco.

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