ZTE Business Operations Grind to a Halt Due to US Export Banby Ryan Smith on May 9, 2018 1:10 PM EST
After getting cut-off from American technology suppliers last month, many of us have been wondering what ZTE would do without access to so many of its critical suppliers. Now we have an answer: the company has ground to a halt.
In a brief filing submitted today on the Hong Kong Exchange, ZTE has notified investors that “As a result of the Denial Order, the major operating activities of the company have ceased.” Without access to its American suppliers, there is little production the company can do at the moment, as they no longer have access to the parts or services necessary to maintain their current operations.
As things stand now, the most immediate relief for ZTE would be to get the seven-year US ban modified or lifted entirely, which according to the company’s filing, they’re in the process of petitioning the US government to do just that. However given the nature of ZTE’s violations – shipping US technology to Iran and North Korea, and then lying about employee reprimands – it will be a significant battle to get the export ban meaningfully altered. Otherwise, in the longer term, ZTE would need to find ways to restructure its business entirely around non-US suppliers such as MediaTek.
In the meantime the company is still solvent according to their filing, as ZTE “maintains sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations.” So while the US export ban is a massive setback for the company, it’s not outright fatal, at least so long as the company is able to resolve their problems quickly.