ZTE is ceasing the majority of its operations over the crippling trade ban it was hit with last month, the company said in a Wednesday filing with the Hong Kong Stock Exchange. The Shenzhen-based original equipment manufacturer is presently only adhering to “its commercial obligations subject to compliance with laws and regulations,” whereas its research and development activities have been halted. The majority of the company’s online storefronts in China aren’t selling its products any longer and manufacturing operations are also understood to have been ceased over the same ban.
Last month, the United States Department of Commerce hit the firm with a seven-year ban on purchasing any kind of American hardware or software, with the move already effectively halting its ambitions in the higher-end segment of the smartphone market where ZTE exclusively relied on chips from San Diego-based Qualcomm. The sanction was a response to ZTE’s violation of a 2017 settlement with the federal government which saw it agree to an $892 million fine over a conspiracy to violate U.S. trade sanctions imposed on Iran. Besides the financial penalty, ZTE also laid off four employees and agreed to discipline 35 others but failed to do the latter. While the reasons for its failure to fully comply with the agreement remain unclear, ZTE is arguing the development wasn’t intentional and was self-reported to the U.S. government as soon as it was identified, claiming the American tech purchase ban is hence too harsh of a punishment for the ordeal which it was so far handling in a transparent manner. The Commerce Department also accused ZTE of repeatedly making false statements as part of their correspondence in the run-up to the newly issued penalty.
ZTE filed to have the sanction suspended until its appeal is heard, with the federal agency being expected to rule on the matter in the coming weeks. U.S. officials remain adamant the row with the Chinese company isn’t related to the growing tensions between Washington and Beijing over trade, a notion that ZTE previously alluded to. ZTE is a publicly traded firm whose majority stake is owned by the People’s Republic of China and has recently been targeted by two congressional bills seeking a complete ban on any federal purchases of its equipment due to national security concerns, with the same legislation also being aimed against Huawei. Even if the ban preventing ZTE from accessing components crucial to its business stands, the company is unlikely to go under in the near term, with its latest statement on the matter indicating it still has access to “sufficient cash.”
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