ZTE on life support after US export ban

ZTE has been forced to cease its global operations as a result of the crippling sanctions imposed on the company by the US government.

In an announcement to shareholders, ZTE said [PDF] that the major operating activities of the company have ceased due to the activation of the denial order from the US Department of Commerce’s Bureau of Industry (BIS).

This order prohibits US 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.

The denial order was initially imposed but automatically suspended in March last year on the condition that ZTE adhere to a settlement agreement which included penalizing the senior officials responsible for the decision to contravene the Iran sanctions.

But the BIS activated the denial order last month after accusing ZTE of violating these conditions by offering full bonuses to executives implicated in the case and failing to issue letters of reprimand in a timely manner.

The sanction relates to an investigation into ZTE’s alleged sale of telecommunications equipment containing US components to Iran in violation of US sanctions imposed on the country.

ZTE’s announcement states that the company has sufficient cash to remain in business “as of now”, and is actively seeking a modification or reversal of the denial order from various US government departments.

But in light of the ongoing trade war between the US and China, the Trump administration may not back down so easily, which would threaten ZTE’s ongoing existence.