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ZTE faces major operations shutdown after U.S. imposed bans

Major operating activities of the company have ceased

Chinese telecom giant ZTE might face uncertainties after U.S bans sales of critical American technologies to the company for seven years.

Reuters reports that ZTE’s major operations have been ceased due to the Denial Order. Without access to such technology, the company has been forced to partially shut down. “Major operating activities of the company have ceased,” ZTE said in a filing last Wednesday.

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

Chinese companies such as ZTE and Huawei are facing the same fate on U.S. market, being restricted to enter based on allegations that the products they’re manufacturing are capable of undetected espionage, which is a major concern to national security according to U.S. intelligence agencies, thus, effectively preventing them to do business in the states.

Earlier this quarter, Huawei’s attempt to enter the U.S. market formally was shattered by U.S. regulators, leading to a last-minute backout from telecom service providers such as AT&T.

According to ZTE, the company maintains sufficient cash and will adhere to its obligations as well, giving the impression that they’re still figuring out what to do while struggling themselves to survive.

ZTE relies on U.S. companies such as Qualcomm and Intel for up to a third of its components.

On the other hand, Taiwanese company MediaTek received a permit from the Taiwanese government to continue supplying their products to ZTE.

ZTE appears to have suspended its online stores on its own website as well as on Alibaba Group’s e-commerce platform Taobao over the past few days, which display a “page being updated” message with no products to order.

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Buyers of ZTE equipments have reported that prices for those jumped for up to 50 percent, with supply chain being halted indefinitely.

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