Chinese telecommunications giant ZTE is ceasing all "major operating activities" after being hit by sanctions from USA regulators.
"This was a hard but necessary decision given ZTE's decision to cease major operating activities and we apologise that this will result in a temporary reduction in device options for customers", Telstra consumer and small business head of innovation, product innovation and strategy Michelle Garra said in a blog post on 10 May. According to a report in Reuters, MediaTek had obtained an export permit to sell parts to ZTE. Earlier today, the company issued a statement to its stockholders announcing that the company was essentially stopping operation as it contests the ruling of the United States government. The company was accused of not adhering to an agreement with the USA related to giving bonuses to employees who had been involved in illegally shipping goods to Iran and North Korea. The Commerce Department ruled ZTE broke the pact, however, by paying full bonuses to employees at the heart of the dispute despite promising otherwise - it also lied to United States officials about the payouts. With no phones rolling off the production line, ZTE has stopped sales through its website and Alibaba's Tmall marketplace.
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ZTE is one of the biggest telecom equipment makers globally but since they heavily rely on U.S companies like Qualcomm and Intel for their components, they are now unable to produce smartphones and devices.
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We'll keep you updated on ZTE, but things sure do look bad at the moment. A ZTE employee also mentioned that employees are reporting to work as usual, but "with not much to do".
The firm does not provide details on which operations are affected, but says that it has enough cash to fulfil its commercial obligations in the public filing.
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USA authorities imposed the penalty after discovering that Shenzhen-based ZTE had misled regulators involving the illegal shipments to North Korea and Iran. The employee, who declined to be named, said business trips had been halted. The Chinese government raised the issue of ZTE last week with a visiting US Trade Delegation. Is the export ban against the company fair?