On April 16, the U.S. Department of Commerce issued an injunction to prohibit U.S. companies from selling components, commodities, software, and technology to ZTE. The injunction effective immediately for seven years until March 13, 2025.
It was March 8, 2016, the U.S. Department of Commerce had accused ZTE of being suspected of violating U.S. export control policies against Iran and imposing an embargo on ZTE. Subsequently, ZTE was included in the “special review list” by the United States, and was granted an interim permit of 3 months after application. After many negotiations, it was continuously extended until the parties reached a formal agreement in March 2017.
In March 2017, ZTE accepted the penalty. According to the agreement signed by the two parties, ZTE should pay US$1.192 billion to the U.S. government, of which 300 million U.S. dollars will be suspended. If the agreement is not violated within 7 years after the agreement is signed, the fine will be exempted from payment. In addition to the fines, ZTE has also carried out internal control reforms and fired many senior executives of the company's CEO. This incident has seriously hurt ZTE.
At the same time, according to the agreement, ZTE is required to take disciplinary measures against employees participating in these banned transactions. The U.S. Department of Commerce pointed out that ZTE officials had lied that they had punished the employees involved, but this was not the case. According to the agreement, ZTE should dismiss four senior executives and punish another 35 employees by reducing bonuses or condemnation. However, in fact, ZTE only fired four senior executives and did not take related measures against the other 35 employees.
If the US companies cuts off the supply to ZTE, it will hurt ZTE deeply since ZTE’s products using many electronic components from US company and need their support during R&D, prototyping, and production…etc. Not sure if ZTE could go through this hardest period.
