Chinese tech firm ZTE says US ban threatens its survival

Posted April 21, 2018

The company also states that the ban will not only "severely impact [their] survival and development" but that the ban will also "cause damages to all partners of ZTE including (sic) a large number of USA companies".

The Commerce Department has an appeals process for companies to try to get off the list, but it is unclear whether that would be available to ZTE because the case had been previously subject to a settlement, according to people familiar with the matter.

ZTE said it regards compliance as the cornerstone of its strategy, adding it invested $50 million in export control compliance projects in 2017 and plans to invest more this year.

The trade body said the action against ZTE came "at a sensitive moment" in Sino-U.S. trade relations and so it can not be ruled out that the United States is seeking to exert pressure on China through sanctions against ZTE.

It is "unacceptable" that the US side insists on unfairly imposing the most severe penalty against ZTE, even before the completion of an investigation, the statement said.

Canadian privacy advocate Michael Geist said that ZTE and the US government should figure out a way to tweak the order so that it does not undermine the security of millions of people using the company's phones by preventing them from accessing security updates.

Yin Yimin, chairman of ZTE, said at a press conference held on Friday afternoon that the company is firmly opposed to the USA ban, which is likely to put the company "in shock" and cause direct losses to its global clients, including carriers and consumers, and its shareholders.

However, the Commerce Department said on Monday that ZTE officials lied about reprimanding the employees and even gave some of them full bonuses. The Commerce Department said ZTE reneged on a pledge to discipline employees who were involved in violating US controls on technology sales to Iran and North Korea and instead paid them bonuses.

The announcement came after the US Department of Commerce imposed denial of export privileges against ZTE for alleged violations of the Export Administration Regulations earlier this week, Xinhua news agency reported. It would also handicap the mainland's ability to build the world's largest 5G network by the end of this decade.

The ban has the potential to affect ZTE severely.

ZTE said it will explore legal measures to protect the legal rights and interests of the company. The six-paragraph official statement from corporate mulls over the punishment and reasserts ZTE's compliance to worldwide law, which it "regard [s] as the foundation and bottom-line of the company's operation".

The Chinese company replaced its chief compliance officer last month after admitting to making false statements to the United States government over its adherence to a settlement agreement, according to an internal notice seen by the South China Morning Post.

China is set to implement a set of new national standards on compliance management systems on July 1, as the government steps up efforts to monitor companies' overseas operations and strengthen their compliance management to curb risk.