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ZTE suspends smartphone sales, after-sale services to comply with U.S. ban

10 May 2018, 02:07 | Melanie Burgess

ZTE announces its major operating activities have ceased

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"Major operating activities of the company have ceased" as a result of the U.S. Commerce Department "denial order" issued last month, ZTE said in a statement issued late Wednesday.

The ban came as huge blow to the company, seeing that 25 to 30 percent of its components came from companies in the U.S. According to analysts, even if ZTE can manage to fill the gap, it will still find it hard to remain competitive.

ZTE has filed a request with the U.S. Commerce Department's Bureau of Industry and Security for a suspension on the ban related to U.S. companies selling components to ZTE, Reuters has reported. In the United States smartphone ZTE took fourth place in sales, as one of the first to catch on to the popularity of U.S. citizens of the gadgets with large screens.

The company said on Wednesday that it's "actively communicating" with the United States for a reversal of the import ban, which was enforced after the firm broke sanctions on sales to North Korea and Iran.

The ban on sales to ZTE has also highlighted China's heavy dependence on semiconductor imports between growing trade stress with the US. ZTE relies heavily on USA companies to supply as much as a third of its components.

"We are hopeful that ZTE will be able to reach a resolution to this matter soon so that we can recommence selling Telstra-branded ZTE devices", the Telstra executive wrote.

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In its statement to the stock exchange Wednesday, ZTE said that it maintains sufficient cash as of now and "strictly adheres to its commercial obligations subject to compliance with laws and regulations".

This order prohibits U.S. companies, including ZTE's major suppliers such as Qualcomm and Google (for Android), from exporting their products to ZTE for a period of seven years.

According to reports, workers at the company's headquarters in Shenzhen are reporting to work but "with not much to do". Otherwise, in the longer term, ZTE would need to find ways to restructure its business entirely around non-US suppliers such as MediaTek.

ZTE was accused by the U.S. Department of Commerce of illegally shipping U.S. equipment to Iran and North Korea. The employee, who declined to be named, said business trips had been halted.

China's Ministry of Commerce said in a statement last Friday that Chinese officials had made "solemn representations" over the ZTE case to the United States delegation. Is the export ban against the company fair?



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