Weeks After US Ban Lifted, ZTE Production ‘Back To Normal’

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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ZTE is set to accelerate its investment in critical parts such as chips after the US supply embargo nearly put it out of business

China’s ZTE has said its production is back to previous levels, more than a month after a ban that prevented US companies from selling equipment to the firm was lifted.

The US imposed the measure in April in response to ZTE’s alleged failure to discipline executives who had colluded to evade US sanctions on Iran and North Korea.

The ban would effectively have put ZTE, one of the world’s largest telecommunications equipment makers, out of business, since it is heavily dependent upon parts obtained from the US.

But in July it was lifted after US president Donald Trump personally intervened, saying he wanted to protect Chinese jobs and also arguing that ZTE is a major buyer of US components.

5G research

“As of today, the main operating business has resumed completely,” the Securities Times newspaper quoted new ZTE chairman Li Zixue as saying at a shareholder meeting at the company’s Shenzhen headquarters on Tuesday, according to Reuters.

“The production mission for August has resumed to normal and R&D is resuming rapidly.”

Investment in 5G and other areas are also moving back to planned levels, ZTE said.

ZTE chief executive Xu Ziyang told the meeting the company is “still in the front line in the communications industry”.

“Our orders have been great and are in line with that of July and August last year,” he said, and added that ZTE believes its network operating business will return to normal growth next year.

In July ZTE said the supplier ban would result in a first-half net loss of 7 to 9 billion yuan (£790m to £1bn), compared to a profit of 2.3bn yuan for the same period a year earlier.

Senate revolt

Companies such as ZTE and Huawei were initially founded to help reduce the country’s use of imported telecoms equipment, and are now major exporters, with Huawei the biggest company in the worldwide telecoms equipment sector.

But the US ban underscored the level to which China continues to rely on imported core technology such as microprocessors.

Xu Ziyang said ZTE was aiming to increase its investment in research and development, in particular for key components such as chips, and build better relationships with third-party chip makers to control risks.

The company is due to report its earnings on Thursday.

As part of its settlement with the US, ZTE was obliged to replace its senior management staff, with both Xu and Li being part of the new team. ZTE also paid the US $1.4bn (£1.08bn) in penalties.

In June the US Senate signalled its displeasure with the settlement by passing a military spending bill that included a provision that would have put the parts embargo back into place, but those measures were softened in the compromise bill reached with the House of Representatives.

The bill Trump eventually signed earlier this month included only a measure prohibiting the US government and its contractors from buying certain “critical” telecommunications and video surveillance equipment from ZTE, Huawei and a few other Chinese communications firms.

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