17 April 2018

China telecoms firm ZTE hit by US sanctions

China's biggest listed telecoms company

China telecoms firm ZTE Corp has been hit with a 7-year ban for a sanctions breach by the U.S. government.

The ban on sales by American companies to ZTE, China’s largest-listed telecommunications equipment manufacturer, is punishment following the charges that the equipment maker allegedly made false statements during an investigation into sales of its equipment to Iran. ZTE has had run-ins with the U.S. government before. They made a loss in 2016 due to a payment of a record fine, which ZTE agreed to pay the US government in settlement of a five-year investigation of trade sanctions violations.

Assessing implications
In a statement, the company said “ZTE is aware of the denial order activated by the United States Department of Commerce. At present, the company is assessing the full range of potential implications that this event has on the company and is communicating with relevant parties proactively in order to respond accordingly.” ZTE aims to launch a 5G smartphone in US by early 2019, and is relying on sales of next-generation 5G network equipment for further growth. However, shipment delays and lost orders on handsets and transmission equipment are likely to result as the ban impacts the supply of components.

Protecting interests
ZTE uses a number of U.S. suppliers, including Intel, Microsoft, Micron Technology and Qualcomm. In a separate move, the UK’s National Cyber Security Centre (NCSC) has written to UK telecoms providers warning them that the use of ZTE's equipment and services could pose a national security risk. China’s Ministry of Commerce said it would take the necessary measures to protect the interests of Chinese businesses.