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ZTE says "major operating activities of the company have ceased"

By Kenny Yeo - on 10 May 2018, 10:00am

ZTE says "major operating activities of the company have ceased"

(Image source: ZTE)

China's second largest telecom equipment maker has announced that it is ceasing all major operating activities.

This follows last month's ban from Washington, which forbids all US firms from supply ZTE with components and technology after it was discovered that ZTE had been illegally supplying Iran and North Korea with US tech.

As a result of this, the Chinese telecom giant was ordered to pay a fine amounting to US$1.2 billion.

But more crucially, the US also slapped ZTE with a 7-year ban on buying any components and technology from US firms.

This means it can't buy processors from Qualcomm for its phones and networking equipment. According to reports, ZTE relies on US firms for about 30% of its components.

Analysts have said that the ban could be fatal to ZTE if not resolved quickly.

For now, ZTE remains alive, a press release from the company said:

As of now, the Company maintains sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations.

ZTE is also petitioning the US government to get the ban lightened or reversed altogether. Again, straight from the horse's mouth:

The Company and related parties are actively communicating with the relevant U.S. government departments in order to facilitate the modification or reversal of the Denial Order by the U.S. government and forge a positive outcome in the development of the matters.

MediaTek has been quoted as a possible alternative supplier to ZTE. However, analysts believe that ZTE will find hard to stay competitive without crucial components from the US.

Employees at ZTE remain hopeful. One said that he was confident that Chinese President Xi Jinping will "sort out this trouble".

Another said that staff are reporting to work as usual but that there isn't much to do.

It won't be an overstatement to say that the next few weeks will be absolutely critical for the company.

Source: Reuters, ZTE

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