ZTE breathes again after US ends five-year probation

ZTE breathes again after US ends five-year probation

Li Zixue Chairman ZTE 16x9.jpg

Chinese vendor ZTE was hoping this morning that its legal nightmare was over after the US ended its five-year probation.

The US imposed the rule, along with penalties of up to US$1.4 billion, after it accepted that it used illegal methods to include US-made products with equipment it supplied to Iran.

Chairman Li Zixue (pictured) said in a statement: “The company is committed to building a world-class compliance enterprise, making compliance the cornerstone of its strategic development and the bottom line of operations, complying with the applicable laws and regulations of the countries in which it operates, and building a comprehensive compliance system.”

Despite Li’s hope that ZTE can move on, the whole issue is likely to be exposed again next month with the publication of a book by Ashley Yablon, formerly general counsel of ZTE US. Capacity last week interviewed Yablon for our Digital Digest podcast.

After the podcast, ZTE told Capacity that the new management that was put in place after the scandal means it is now a different company.

Li, who became chairman in 2018 as part of the new management team, said in his statement today: “The company has full confidence in the effective operation and continuous improvement of the compliance management system, and will, as always, fulfil its responsibilities to global customers, employees, shareholders and partners, and actively promote the innovation and sustainable development of the global ICT industry.”

ZTE’s shares on the Shenzhen stock exchange went up to 25.99 Chinese yen on the news, after being briefly suspended in advance of the official announcement. Just a week ago they were trading at 22.55 yen – a rise of more than 15% in seven days. But they are still well below 50.86 yen, a level reached in March 2021.

ZTE is still subject to an agreement negotiated with the Department of Commerce (DoC) in the US in 2018 at the height of the Iran scandal, which came close to causing the death of the company.

In May 2018 it said it had shut down operations because of the action taken against it last month by the US, especially a denial order from the DoC that outlawed US companies such as Cisco, Dell, Intel, Microsoft, Oracle, Qualcomm and Symantec from trading with ZTE for seven years.

At the time ZTE issued a statement to the Hong Kong stock exchange where its shares are quoted: “As a result of the denial order, the major operating activities of the company have ceased.” However, the US lifted the denial order in July 2018.

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