ZTE agrees to pay US$900m fine for violating US trade sanctions

Chinese telecom equipment maker ZTE Corp has agreed to plead guilty and pay nearly US$900 million (RM4 billion) in a United States sanctions case, drawing a line under a damaging scandal that had threatened to cut off its supply chain.

While the fine was larger than expected, ZTE, also a major smartphone maker, reported robust underlying earnings for last year and was upbeat in estimates for the first quarter.

That and the resolution of the case helped its Hong Kong-listed shares surge six per cent.

A five-year investigation found ZTE conspired to evade US embargoes by buying US components, incorporating them into ZTE equipment and illegally shipping them to Iran.

In addition, it was charged in connection with 283 shipments of telecommunications equipment to North Korea.

“ZTE Corp not only violated export controls that keep sensitive American technology out of the hands of hostile regimes like Iran’s, they lied about their illegal acts,” said US attorneygeneral Jeff Sessions in a statement.

ZTE relies on US suppliers for 25 per cent to 30 per cent of its components, many of which are key to its goods.

It purchases US$2.6 billion worth of components a year from US firms. Qualcomm, Microsoft and Intel are among its suppliers.