ZTE walks tightrope after US trade authorities slap export ban

Probe into allegations the telecom equipment vendor flouted sanctions by funneling U.S. products to Iran could severely hurt the Shenzhen firm’s business

(From Caixin Online)

“The investigations are still in progress, and may result in criminal and civil liabilities under U.S. laws,” ZTE Corp. said on April 6, when it released its earnings figures for 2015.

chipU.S. authorities have been investigating ZTE since 2012 over allegations it sold software and equipment containing components made in the United States to Iran through shell companies to get around U.S. trade sanctions, people close to ZTE said.

The U.S. Commerce Department said on March 7 that American manufacturers are banned from selling components to ZTE, and foreign manufacturers will be prohibited from selling products containing a significant amount of U.S.-made parts to the firm.

ZTE and three subsidiaries – ZTE Kangxun Telecommunications Ltd., Beijing 8-Star International Co. and Iran-based ZTE Parsian – were hit by the rules.

The company won a temporary reprieve after a series of talks with U.S. officials, and some supplies are being allowed until June 30, a ZTE employee who asked to remain anonymous said.

ZTE delayed the release of its 2015 financials by almost two weeks to assess the impact of the export restrictions, the company said. Net profits rose 22 percent last year to 3.2 billion yuan, the firm said, although it fell short of a January projection of 3.8 billion yuan, a filing to the Shenzhen stock exchange on April 6 said.

Total revenue crossed the 100 billion mark for the first time, a 23 per cent increase from 2014, but short of a January forecast by 600 million yuan.

The tough export restrictions are a major setback for the telecoms equipment and smartphone maker, which relies heavily on imported parts. Exports from the United States account for up to 15 percent of its total supplies, Nomura Securities International Inc. said. Read more

 



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