China’s ZTE Corp says its main business operations have ceased in the United States following a ban imposed by the Commerce Department. However, the second-biggest telecom equipment maker is trying to have the ban modified or reversed to continue its main business operations.
US Commerce Department imposed a ban last month forbidding US companies from selling hardware and software to ZTE. The Commerce Department said that the ban has been imposed after it found ZTE to have violated US export restrictions by illegally shipping to Iran.
“As a result of the Denial Order, the major operating activities of the company have ceased,” ZTE said in the exchange filings late on Wednesday. “As of now, the company maintains sufficient cash and strictly adheres to its commercial obligations subject in compliance with laws and regulations,” it added.
As the world’s second-biggest telecom equipment maker, ZTE relies on US companies such as Qualcomm and Intel for up to third of its components, reports Reuters. Analysts predict it will be hard for ZTE to stay competitive without supply of components from American suppliers. In the meantime, ZTE will continue to get supply of components from Taiwanese semiconductor company MediaTek.
The ban came amid tension between the US and China’s trade war. The Chinese government is said to have raised the issue of ZTE last week with a visiting US trade delegation. ZTE said it is actively communicating with the US government “in order to facilitate the modification or reversal of the Denial Order and forge a positive outcome in the development of matters.”
ZTE has submitted a request to the US Commerce Department for the suspension of the ban, and it seems to have suspended its online store on its own website. The ZTE has also suspended its store on Alibaba Group’s e-commerce platform Taobao in the past few days. ZTE is also said to be unable to continue supplying phones after sanctions were imposed, says US-based wireless operator Consumer Cellular Inc.
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John Marick, Chief Executive Officer of Consumer Cellular Inc told Reuters that ZTE has not shared guidance on whether its Android phones will continue to receive software updates. ZTE settled the sanction case for illegally shipping products with US technology to countries including Iran and paid a record fine of $900 million.
US Commerce Department said last month that it is reactivating the ban after ZTE violated terms of the settlement, and made false statements repeatedly. ZTE is now hoping President Xi Jinping of China will help sort out this trouble.