ZTE Corp. is said to face at least $3 billion in losses from US ban
ZTE Corp. is estimating losses of at least 20 billion yuan ($3.1 billion) from a US technology ban that’s halted major operations as clients pull out of deals and expenses mount, people familiar with the matter said.
The telecoms gear and smartphone maker, however, is hopeful of striking a deal soon and already has a plan in place — dubbed “T0” — to swing idled factories into action within hours once Washington agrees to lift its seven-year moratorium on purchases of American chips and components, said the people, who asked not to be identified talking about private negotiations. The company declined to comment.
Shenzhen, China-based ZTE depends on US components, such as chips from Qualcomm, Inc., to build its smartphones and networking gear. The ban, for breaching terms of a settlement over sanction- breaking sales to Iran, has all but mothballed China’s second- largest telecoms gear maker and become entangled in a trade dispute between the world’s two largest economies. On Tuesday, President Donald Trump said he’s reconsidering US penalties as a favor to Chinese President Xi Jinping and may instead fine the company more than $1 billion.
The US action has spooked potential clients during the crucial first- half IT spending season and even prompted some to renege on agreed deals, the people said. ZTE’s shelling out an estimated 80 million to 100 million yuan in daily operational expenses alone while most of its 75,000 employees sit idle, the people said.
But it’s hopeful of ramping up swiftly once a settlement is reached: thousands of workers biding their time in the company’s dormitories stand ready to flood its factories once a green light is given, the people said.
It’s unclear what ZTE can do to prompt a reprieve, though it’s expected to reshuffle executives and possibly its board. Chinese government officials, however, are undertaking negotiations on behalf of ZTE and the company, which doesn’t have much influence in the process, will have to accept the terms of any settlement reached between Beijing and Washington. — Bloomberg