US ban halts main ZTE operations

HONG KONG (Reuters) – ZTE Corp.’s main business operations have ceased due to a ban imposed by the US government, but China’s second biggest telecom equipment maker is trying to have the ban modified or reversed, it said on Wednesday.

ZTE was hit by a ban last month from Washington, forbidding US firms from supplying it with components and technology after it was found to have violated US export restrictions by illegally shipping goods to Iran.

“As a result of the Denial Order, the major operating activities of the company have ceased,” ZTE said in the exchange filings late on Wednesday.

“As of now, the company maintains sufficient cash and strictly adheres to its commercial obligations subject in compliance with laws and regulations,” it said.

The US action, first reported by Reuters, could be devastating to ZTE.

As one of the world’s largest telecom equipment makers alongside Huawei, Ericsson and Nokia, ZTE relies on US companies such as Qualcomm and Intel for up to a third of its components.

Analysts have said it will be hard for ZTE to stay competitive even if it could find non-American suppliers.

Taiwanese semiconductor company Mediatek (2454.TW) said last week it had received a permit from the Taiwanese government to continue to supply ZTE.

ZTE said it was actively communicating with the US government “in order to facilitate the modification or reversal of the Denial Order by the US government and forge a positive outcome in the development of matters.”

The ban that threatens to cut off ZTE’s supply chain came amid heightened tension over a possible US-China trade war. The Chinese government raised the issue of ZTE last week with a visiting US trade delegation.