USA ban forces China's ZTE to suspend all major activities

ZTE Is No Longer Making Phones

The announcement comes after ZTE, China's second-largest telecom equipment company, was found by the USA to have illegally shipped its products to Iran, per Reuters.

The move led ZTE's chairman to issue a dramatic internal memo, saying "I'd like to urge all employees to maintain a state of calm, to man one's post and do one's job well". The Chinese OEM said in its exchange filings that their major operating activities have been halted after the enforcement of the Denial Order. The Bureau is an agency of the United States Department of Commerce that issued the ban after claiming that ZTE had violated the terms of a previous settlement over admissions of illegal shipping of U.S. technology to Iran, and making repeated false statements.

The ban was issued by the U.S. Commerce Department in April, after the U.S. government said ZTE network equipment could pose a risk to national security. Because American companies are ZTE's sole source of chip supply, the ban prompted immediate panic within the company. The company was already struggling to secure a meaningful foothold in Western markets, but the DoC's ban has effectively quashed any dreams of strong US sales, at least for the time being.

ZTE heavily relies on US -made components and American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE's equipment.

If Chinese tech company ZTE falls, the shock waves will be felt around the globe.

ZTE was founded in 1985 and is China's second largest telecom equipment maker after Huawei. But ZTE reportedly failed to follow the stipulations of the settlement when it provided bonuses to those employees involved in illegal activities who were allowed to remain employed by ZTE.

Last week, Chinese mediator while addressing related trade talks with the USA correspondents in Beijing asked the United States to heed ZTE's plea, and take into consideration the company's attempts to modify the ban and advance its compliance.

These recent events have made it clear that for Chinese companies wanting to operate in America or use U.S. made technology, things can get volatile, and quick. Qualcomm has been supplying the silicon used in ZTE's flagship phones for years, but this ban has killed any future sales.

Taiwanese semiconductor firm Mediatek said last week that its government gave it permission to continue supplying ZTE with its products. The company sold about $116 million worth of chips and modules to ZTE a year ago, accounting for roughly 30% of its annual revenue. We've approached Boost for comment on this development but at the time of writing, we've not heard back.

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