US slaps ex­port ban on ZTE

A warn­ing shot for Chi­nese chip­mak­ers to catch up

Global Times - - Front Page - By Chen Qingqing

The ex­port ban im­posed by the US Depart­ment of Com­merce on Chi­nese tech firm ZTE Corp has sent a warn­ing shot at Chi­nese com­pa­nies re­ly­ing on over­seas com­po­nents, forc­ing China to de­velop its own chips and catch up with their US ri­vals, in­dus­try in­sid­ers said.

US Sec­re­tary of Com­merce Wil­bur Ross an­nounced Mon­day (US time) that Amer­i­can com­pa­nies will be banned from ex­port­ing com­po­nents to Shen­zhen-based Chi­nese com­pany ZTE, which pro­duces smart­phones and other telecom­mu­ni­ca­tion equip­ment.

The US Com­merce Depart­ment claimed that ZTE lied to the US gov­ern­ment about pun­ish­ing em­ploy­ees who vi­o­lated US sanc­tions against North Korea and Iran.

ZTE spends mil­lions buy­ing com­po­nents from hun­dreds of US com­pa­nies, cre­at­ing thou­sands of jobs in the US, the Chi­nese Min­istry of Com­merce said in a Tues­day state­ment. The min­istry has urged the US to han­dle the is­sue in line with the

law, and cre­ate a fair and sta­ble en­vi­ron­ment for Chi­nese com­pa­nies.

In re­sponse to the US ban, ZTE said the com­pany is aware of the de­nial or­der ac­ti­vated by the US Depart­ment of Com­merce.

At present, the com­pany is as­sess­ing the full range of po­ten­tial im­pli­ca­tions the ban will have on the com­pany and is proac­tively com­mu­ni­cat­ing with rel­e­vant par­ties, the com­pany told the Global Times.

About 30 to 40 per­cent of com­po­nents that ZTE sources are from the US, in­clud­ing mi­crochips, op­er­at­ing sys­tems, op­ti­cal net­work prod­ucts and soft­ware, Irene Chen, chief con­tent of­fi­cer with the Chi­nese in­dus­try in­for­ma­tion plat­form Deep­Tech, told the Global Times.

Sales of telecom­mu­ni­ca­tions equip­ment ac­count for 60 per­cent ZTE’s to­tal sales, Chen said. “Over 60 per­cent of its for­eign sup­pli­ers for telecom­mu­ni­ca­tions equip­ment come from the US,” she noted.

Some US sup­pli­ers saw their share prices slump on Mon­day fol­low­ing the ban. Shares of NASDAQlisted Oclaro Inc, which re­port­edly gen­er­ated 18 per­cent of last year’s rev­enue from ZTE, fell by as much as 15 per­cent on Mon­day. Aca­cia Com­mu­ni­ca­tions, which sells high-speed co­her­ent op­ti­cal in­ter­con­nect prod­ucts, saw its shares de­cline more than 35 per­cent.

The ban is dev­as­tat­ing for ZTE, as com­po­nents shipped from the US are not im­me­di­ately re­place­able within China, Liu Kun, vice gen­eral man­ager of the IC In­dus­try Re­search Cen­ter at CCID Con­sult­ing, told the Global Times.

“ZTE dilemma re­flects a ma­jor dif­fi­culty the Chi­nese chip mak­ing in­dus­try is fac­ing,” said Liu.

Liu added that it is urgent that Chi­nese com­pa­nies de­velop their own high-end chips.

Can’t de­pend on US

The is­sue needs to be part of ne­go­ti­a­tions be­tween the Chi­nese and US gov­ern­ments, which are fac­ing es­ca­lat­ing trade tensions, Wang Yan­hui, head of the Shang­hai-based Mo­bile China Al­liance, told the Global Times.

“It has be­come crys­tal clear that Chi­nese firms can’t de­pend on for­eign sup­pli­ers, and China’s semi­con­duc­tor in­dus­try will re­main an es­sen­tial in­dus­try in the fu­ture,” said Xiang Li­gang, chief ex­ec­u­tive of the tele­com in­dus­try web­site cc­

When the US blocked In­tel from sell­ing su­per­com­put­ers to China years ago, China de­vel­oped its own su­per­com­puter – the Sun­way Tai­huLight – which has be­come the fastest com­puter in the world, Xiang noted. “Mount­ing pres­sure from the out­side is not nec­es­sar­ily a bad thing,” he said.

Chi­nese au­thor­i­ties have al­ready set tar­gets to nar­row the gap with for­eign play­ers in the semi­con­duc­tor sec­tor by 2020, as about 90 per­cent of the semi­con­duc­tors used in China are im­ported, cost­ing hun­dreds of bil­lions of dol­lars ev­ery year, do­mes­tic IT in­dus­try web­site ee.ofweek. com re­ported in March 2017.

The US is ex­am­in­ing ways to re­tal­i­ate against China’s re­stric­tions on US providers of cloud com­put­ing and other high-tech ser­vices, the Wall Street Jour­nal re­ported on Tues­day.

“The tech in­dus­try is likely to be­come the next bat­tle­ground amid China-US tit-for-tat trade dis­putes,” Liu said.

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