Published On: Wed, May 9th, 2018

ZTE is on life support after US ban

ZTE is ending “major operating activities,” the company announced today, as its conditions worsen under a US ban on exports to the Chinese phone maker. ZTE says in a filing that it has enough cash to stay afloat while pausing operations for the time being. While the news doesn’t mean ZTE is completely dead, things aren’t looking good for the phone maker.

The company says it’s in talks with the US about how to reverse or modify the Department of Commerce’s April decision to ban exports and “forget a positive outcome in the development of matters.” The ban means that American companies like Dolby and Qualcomm can’t export parts to ZTE for up to seven years, which restricts ZTE’s ability to compete with other devices on the US market that have those parts.

To replace the loss of Qualcomm, ZTE will receive microchips from Taiwan-based chipmaker Mediatek instead. MediaTek got an export permit this week to sell parts to ZTE, it confirmed to Reuters on Monday.

The Commerce Department says ZTE failed to uphold a plea agreement after it pleaded guilty last year to illegally shipping US equipment to Iran and North Korea. Part of the deal was that ZTE would reprimand and deny bonuses to the employees who had acted illegally. But the company didn’t meet this part of the deal. It gave full bonuses to those employees and only fired four senior staffers while keeping 35 employees who had also violated the law, officials told Reuters. The company had also agreed at the time that it would forfeit its export privileges for seven years if it failed to meet the agreement, which is what’s happening now.

The US ban prompted ZTE to deploy a crisis team in late April, a leaked internal memo suggested. “I would like to appeal to all employees to maintain a state of calm,” company chairman Yin Yimin apparently wrote in the memo seen by employees.

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