China hits back at US over re­stric­tions on ZTE

The Pak Banker - - COMPANIES/BOSS -

Chi­nese of­fi­cials on Tues­day hit back at the United States over its de­ci­sion to im­pose re­stric­tions on tele­com equip­ment maker ZTE Corp for al­legedly sell­ing prod­ucts to Iran in vi­o­la­tion of sanc­tions. Call­ing the re­stric­tions "not a cor­rect way" to han­dle eco­nomic dis­putes, For­eign Min­is­ter Wang Yi told re­porters the ap­proach "only hurts oth­ers with­out nec­es­sar­ily ben­e­fit­ing one­self".

The US Com­merce Depart­ment on Mon­day banned US sup­pli­ers from sell­ing com­po­nents to Guang­dong­based ZTE. It claimed the com­pany "il­lic­itly ex­ported" con­trolled items to Iran and its sup­pli­ers in the US will need to ap­ply for a hard-to-get per­mit be­fore sell­ing prod­ucts to ZTE again.

ZTE said the com­pany is "fully com­mit­ted" to com­pli­ance with the laws and reg­u­la­tions in the ju­ris­dic­tions in which it op­er­ates.

"ZTE has been co­op­er­at­ing, will con­tinue to co­op­er­ate and com­mu­ni­cate with all US agen­cies as re­quired. The com­pany is work­ing ex­pe­di­tious- ly to­ward a res­o­lu­tion of this is­sue," it said in a state­ment. ZTE, whose 2015 rev­enue ex­ceeded 100 bil­lion yuan ($15 bil­lion), has sus­pended trad­ing in its stocks on the Shen­zhen and Hong Kong ex­changes since Mon­day.

The Min­istry of Com­merce also crit­i­cized the US re­stric­tions on the coun­try's se­cond-largest tele­com equip­ment maker. "The US move will se­verely im­pair the nor­mal com­mer­cial ac­tiv­i­ties of the Chi­nese firm. China will con­tinue to en­gage with the US side on the is­sue," the min­istry said in a state­ment.

James Yan, re­search di­rec­tor at con­sul­tancy Coun­ter­point Tech­nol­ogy Mar­ket Re­search, said the hard­est-hit area will be chip sup­ply.

ZTE re­lies heav­ily on San Diego, Cal­i­for­nia-based semi­con­duc­tor firm Qual­comm Inc for mo­bile chips. The com­pany's other ma­jor US sup­pli­ers in­clude pro­gram­mable logic devices mak­ers Xil­inx Inc and Al­tera Corp.

"I be­lieve ZTE will team up with the Min­istry of Com­merce and its ma­jor part­ners in the US, in­clud­ing Qual­comm, to ne­go­ti­ate with the US au­thor­i­ties," said Yan.

Qual­comm and other sup­pli­ers have yet to com­ment on the case.

Be­cause of ro­bust sales of its in­ex­pen­sive pre­paid devices, ZTE is the fourth-largest smart­phone ven­dor in the United States by ship­ment, tak­ing about a 7 per­cent mar­ket share, ac­cord­ing to re­search firm In­ter­na­tional Data Corp. Its sales chan­nels in­clude ma­jor tele­com car­ri­ers such as AT&T Inc, T-Mo­bile US Inc and Sprint Corp.

How­ever, ZTE's pres­ence in the world's most prof­itable hand­set mar­ket lags far be­hind the front run­ners Ap­ple Inc and Sam­sung Elec­tron­ics Co Ltd. It is not the first time ZTE has faced tough scru­tiny in the US.

In 2013, the House of Rep­re­sen­ta­tives In­tel­li­gence Com­mit­tee con­ducted a hear­ing on ZTE and Huawei Tech­nolo­gies Co Ltd to see if their US op­er­a­tions were a risk to in­for­ma­tion se­cu­rity. Huawei and ZTE were bid­ding on a num­ber of tele­com in­fra­struc­ture projects in the US at the time. Both com­pa­nies have since been un­able to clinch ma­jor tele­com con­struc­tion deals in the coun­try. ZTE is fo­cus­ing on tele­com net­work con­struc­tion projects in China, the Middle East and Europe as well as global smart­phone sales for its prof­its. The com­pany re­ported a net profit of al­most 3.78 bil­lion yuan last year, a 43 per­cent jump year-onyear. The Chi­nese com­pany at­trib­uted the growth to 4G net­work ex­pan­sion in China and hand­set sales around the globe.

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