ZTE Claims Survival At Risk Due To US Sales Ban

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An employee holds an interface card in a Huawei Fusion Cube storage system

It is not acceptable that the U.S. Commerce Department insists on the unfairly imposing the severe penalty on the company even prior to the completion of investigating all the facts, ignoring ZTE's diligent work and the progress it's made on compliance with exports, said the company in its statement.

Until the company assures that it will be able to keep delivering updates to the Android gadgets, people should hold off on buying ZTE phones, consumer groups in the USA said, Reuters reports. The case has drawn global attention because it comes as U.S. President Donald Trump spars with Beijing over accusations that China steals American intellectual property and that products like ZTE's smartphones could pose a national security risk.

The trouble for ZTE's supply chain began on Monday when the US Commerce Department imposed a ban on sales by American companies to ZTE for seven years.

The Shenzhen-based company, the biggest listed Chinese telecommunications equipment provider, was banned from purchasing goods and services from United States companies for seven years after it did not fully comply with the terms of a 2016 settlement for violating USA trade sanctions against Iran and North Korea.

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 denial order not only severely put the survival of ZTE in danger, it also hurts the interests of all the partners of ZTE, including a large number of American companies", added ZTE. Washington has also pressured US companies not to buy networking equipment and smartphones from ZTE and rival Huawei over concerns they could pose a national security risk due to potential for spying by Beijing.

It noted, however, that it was "determined, if necessary, to take judicial measures to protect the legal rights and interests of our company, our employees, and our shareholders".

ZTE Corp 0763.HK 000063.SZ responded by suspending trading of its shares on Chinese stock markets and delaying an earnings release.

"The US is thinking and acting like a bully - only it can have high tech and others cannot".

Established in 1985, ZTE provides technology and products to clients in more than 160 countries and regions.

Domestic producers have yet to master some core technology and the production of key components, Ye Tianchun, head of the Chinese Academy of Sciences institute of microelectronics, said.

ZTE will increase R&D investment, Yin said.

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