Mobile/Wireless Components

Embattled ZTE Files Appeal Over Export Ban

ZTE has finally caught a break: Taiwan chipmaker MediaTek has been given the all-clear to resume exports to the Chinese vendor.

But while it is a rare piece of good news for the embattled firm, it means continuity in the supply only of certain handset components.

The company, which faces a ban on all US-supplied equipment, relies heavily on US suppliers such as Acacia Communications Inc. and Oclaro Inc. (Nasdaq: OCLR) for key network components, and on Qualcomm Inc. (Nasdaq: QCOM) and other vendors for device parts.

ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) has announced that it is seeking a stay on the decision by the Commerce Department to block all US exports to the handset and network gear-maker.

It describes the penalty as "unacceptable" and says it will damage "all partners of ZTE, including a large number of US companies."

The Commerce Department said ZTE had breached commitments made when it settled a case a year ago over the sanctions-breaching sale of equipment to Iran. (See ZTE to Pay $892M Fine to Settle US Trade Dispute.)

The penalty stunned ZTE and led to a bout of soul-searching in China's hi-tech industries about the country's reliance on foreign semiconductors and operating systems.

It has also pitched the Shenzhen-based company right into the middle of the US-China trade and economic dispute. (See Huawei, ZTE in the Eye of a Trade Storm.)

When negotiators met for the first round of talks in Beijing last week, the lifting of the ZTE ban was one of the top priorities for the Chinese team.

According to Bloomberg, China is demanding an end to the ban on chip exports and for the US to "adjust" the penalty on ZTE.

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In an apparent reference to the prohibitions on Huawei Technologies Co. Ltd. and ZTE network gear, it is also seeking "open government procurement" and equal treatment for Chinese companies in national security issues.

The two days of talks were inconclusive, with the Chinese claiming "big differences" remained between the two sides.

Further discussions will take place in Washington next week.

ZTE stock has been suspended from the Hong Kong Stock Exchange since April 17.

It has just announced that it will postpone its annual general meeting, previously set for May 11, to a future date.

— Robert Clark, contributing editor, special to Light Reading

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