ZTE reaches billion dollar deal with U.S. government

Fredrick Soto
June 8, 2018

Reuters says that the deal will include ZTE paying a $1 billion fine for violating usa sanctions, as well as putting additional funds in escrow in case of any future violations.

U.S. Secretary of Commerce Wilbur Ross announced that ZTE will pay a $1 billion fine for its recent violations.

In April, the commerce department barred ZTE from importing American components for seven years, having concluded that it deceived U.S. regulators after it settled charges last year of sanctions violations.

An agreement in principle is not a final agreement but is a step toward it. Commerce Department spokesman James Rockas told Reuters that "no definitive agreement has been signed by both parties". The ban on buying USA parts was imposed in April after the company lied about disciplining some executives responsible for the violations.

ZTE was the first Chinese telecommunications company to go public. Republican Senators Marco Rubio and Susan Collins are co-sponsors, as are Democrats Richard Blumenthal and Bill Nelson.

Under the new agreement, ZTE will have to pay a $1 billion fine and replace its entire board of directors and senior leadership.

ZTE's major markets are communications networks (which would include 5G networks now under development), IOT ("internet of things"), big data and cloud-computing products, according to the annual report.

Several US lawmakers have warned against easing sanctions on ZTE, citing national security concerns.

"This is a pretty strict settlement, the strictest and largest fine that has ever been brought by the Commerce Department against any violator of export controls", Ross said on CNBC. The company already has a US court-appointed monitor.

ZTE was found to have shipped its sophisticated telecommunications equipment to both countries, which the State Department lists as supporters of terrorism, and to have repeatedly lied to USA investigators about its actions. "That's good. But it will do nothing to keep us safe from corporate and national security espionage".

Republican Senator Tom Cotton of Arkansas and Democratic Senators Chris Van Hollen of Maryland and Chuck Schumer of NY introduced an amendment to the National Defense Authorization Act that would stop the president from offering ZTE a deal. The two countries have threatened to impose tariffs on up to $200bn worth of each other's products in a dispute over China's tactics to supplant USA technological supremacy, including demands that United States companies hand over trade secrets in exchange for access to the Chinese market.

A US investigation into ZTE was launched after Reuters reported in 2012 the company had signed contracts to ship hardware and software worth millions of dollars to Iran from some of the best-known usa technology companies. USA goods exported to China a year ago totaled $130 billion while Chinese imports to the US totaled $506 billion. US officials reached a deal on June 7, 2018, to ease sanctions that threatened to cripple Chinese smartphone maker ZTE, Ross said. "The ZTE case was a thorn in the side for China ..."

Qualcomm Chief Executive Officer Steven Mollenkopf said on Thursday he hoped the ZTE agreement would pave the way for the NXP approval.

Shares in NXP Semiconductors NV rose 4.9 percent in NY after news of the ZTE deal was announced.

Shares of Acacia and Oclaro extended their gains on Tuesday in heavy trading after news of the preliminary deal, ending up 1.7 percent and 1.8 percent, respectively.

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