Chinese phone maker ZTE saved from brink after deal with U.S.

08 June, 2018, 06:53 | Author: Brooke Harris
  • ZTE will reportedly pay total of $1.7B to lift US Commerce Department ban

The Trump administration reached a "definitive agreement" today with Chinese telecom giant ZTE that Commerce Secretary Wilbur Ross claims "imposes the most strict compliance that we've ever had on any company, American or foreign".

US media reported late last month that the US Commerce Department had brokered a new deal under which ZTE would pay a substantial fine, hire American compliance officers to be placed at the firm and make changes to its current management team. Furthermore the company will have to completely clean house on its executive team and board of directors, replacing all of the members in both of those groups.

This week there were several reports that the usa and China had reached the broad outlines of a deal during Ross's recent trip to Beijing.

Given ZTE's reliance on US-made parts, the sanctions effectively crippled the company and forced major operations to cease.

After having been found to have sold equipment to sanctioned countries such as Iran and North Korea, ZTE was previously fined $1.19 billion.

The agreement comes as U.S. President Donald Trump seeks trade concessions from China and negotiations continue to avoid a trade war between the world's two largest economies. Apparently, the U.S. is fining ZTE to the tune of $1 billion with $400 million in escrow on top of that to cover future violations.

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Several U.S. chipmakers, including Qualcomm and Intel, count ZTE as a customer.

It's been a really rough couple of months for ZTE, but according to new reports, the company's troubles may soon be over as it has apparently almost reached a deal with the USA government. In addition, he said, "we still retain the power to shut them down again", if the USA finds the company doesn't abide by the settlement terms.

The U.S. had imposed sanctions on ZTE for illegal sales to Iran and North Korea, but the Chinese company agreed to take corrective action. That's in addition to the $1 billion fine paid a year ago. Chinese telecom firms like ZTE and Huawei are suspected of having ties to the Chinese military, and their products already are banned on many United States military bases.

Chinese telecom giant ZTE said its major operations had ceased following last month's United States ban on American sales of critical technology to the company. Ross had been instructed to look into easing restrictions on ZTE by President Trump, who had received a personal request from Chinese President Xi Jinping. "No decision has been reached by both sides as of now", Kudlow told reporters.

Oclaro shares are up 1.1%.

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