ZTE Ends Major Operations Following Trade Ban by U.S.

ZTE Corp. calls the upcoming two weeks crucial in resolving a blockade placed by the U.S. that brought to a halt its main businesses and squeezed its revenue stream, signaling the possible collapse of one of the largest makers of networking gear and phones in the world.

The second largest telecom equipment maker in China said on Thursday that it has suspended all its major operations. That means the three major divisions it has –devices, network gear and enterprises solutions – have caused sales to be halted and are producing very little income.

ZTE said that the upcoming two weeks were critical and urged its managers to keep employees calm, according to a leaked email that was sent to senior staff members.

The company is intent on resolving a blockade of seven years by Washington that was places as punishment for ZTE violating terms of a sanctions settlement made in 2017, then lying about the same.

That has cut access off to technology from the U.S. it needs for the building of the majority of the products it makes from semiconductors from Qualcomm to Lumentum Holdings optical chips.

ZTE’s position is becoming increasingly more precarious and has been exacerbated because of tensions between the two largest economies in the world that are in the middle of trying to forestall a huge trade war.

It has essentially used up its entire inventory in the one month since the imposition of the ban and has no way of replenishing it.

On Thursday, the official ZTE website and its store that sells its flagship smartphone in the Tmall marketplace of Alibaba suspended sales. Carriers such as Telstra Corp in Australia have stopped selling its devices.

The best hope for ZTE might be from an intervention by Beijing, but that is considered a long shot given the increased tensions between China and the U.S.

President Donald Trump threatened tariffs on more than $150 billion in imports from China for the alleged violation of intellectual property rights. In retaliation, Beijing vowed to impose tariffs on everything from U.S. planes to soybeans.

This blow came at the time ZTE was making preparations to lead the charge for the country into the fifth-generation era of wireless technology, beside its local rivals Huawei Technologies.

Big wireless carries across the globe are preparing for costs in the billions for rolling out their 5G networks, which will enable new technologies access on internet to augmented reality.

ZTE has labeled its punishment unacceptable and has threatened legal action.

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