ZTE to reopen after $1 billion fine, new leadership

08 June, 2018, 10:48 | Author: Lora Ball
  • ZTE has reportedly made an agreement with the U.S. to lift Denial Order

The Chinese telecommunications giant ZTE has reportedly struck a preliminary agreement with the U.S. Commerce Department, so it can move towards getting back into business after a ban on purchasing American components and software.

The deal announced by Commerce Secretary Wilbur Ross allows ZTE to stay in business.

The measure was introduced hours after Commerce Secretary Wilbur Ross announced that the USA had agreed to lift the seven year ban on US companies selling components and software to ZTE. Commerce Department spokesman James Rockas told Reuters on Tuesday that "no definitive agreement has been signed by both parties".

Democrat and Republican senators denounced Trump's offer to ease the ZTE sanctions as an offer that imposed punitive measures the company had already disregarded once before, while garnering no true concessions from China.

Rubio alluded to Trump's steel tariffs, but the Florida senator hasn't been more vocal since Trump levied those - an issue that is playing out in Florida.

Ross insisted that ZTE deal was an enforcement matter, separate from trade.

Under the new agreement, ZTE will have to pay a $1 billion fine and replace its entire board of directors and senior leadership.

Last year, ZTE paid over $2.3 billion to USA suppliers, a senior ZTE official told Reuters last month.

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For the last month, Chinese smartphone giant ZTE has been largely shut down after the Trump administration banned U.S. firms from selling it technology. "It's unprecedented to have USA agents as monitors ..."

Ross called ZTE's actions a "world-class embarrassment", and said that the US deal with ZTE imposes the "most strict" compliance ever on any company. "I hope it means something good to us, but we are really focused more on our individual application", Mollenkopf told a corporate governance conference in NY.

Senate Democratic leader Chuck Schumer called the agreement "a 180-degree turn away from the president's promise to be tough on China".

One of the USA companies caught in the crossfire is Qualcomm Inc, whose products account for the lion's share of chips inside ZTE smartphones.

A Van Hollen provision already in the defense bill would require Trump to certify to Congress that certain Chinese telecommunications companies such as ZTE and Huawei have obeyed USA laws for one year and worked in cooperation with US investigators before pulling back the economic sanctions imposed on the companies.

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

David Dollar, a China expert at the Brookings Institution, said the ZTE deal was an unorthodox way to correct an overly harsh punishment. Its global smartphone market share is about 11 percent, and its total revenue was about $92 billion in 2017.

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