ZTE Corp. regards the next two weeks as crucial to resolving a U.S. blockade that’s brought its main businesses to a standstill and choked off revenue, signaling the potential collapse of one of the world’s largest makers of phones and networking gear.
The No. 2 Chinese telecom equipment maker said Thursday it’s suspended all major operations. That means its three main divisions — network gear, devices and enterprise solutions — have all but halted sales and aren’t bringing in sizable income, a person familiar with the matter said. ZTE specified the coming fortnight as a “critical window” and urged managers to calm employees, according to an email to senior staff seen by Bloomberg News.
ZTE remains intent on resolving a seven-year blockade Washington imposed as punishment for violating the terms of a 2017 sanctions settlement, then lying about it. That cut off access to the American technology it needs to build most of its products, from Qualcomm Inc.’s semiconductors to optical chips from Lumentum Holdings Inc.
“The company is currently working hard to speedily resolve this impasse,” read the email. “Don’t let inaccurate information and rumors unsettle us. Stick to your posts, rally your teams, and calm your troops.” It didn’t elaborate on that two-week timeframe, which takes it roughly to the end of May.
ZTE booth at the Mobile World Congress in Feb. 2017.Photographer: Pau Barrena/Bloomberg
ZTE’s increasingly precarious position is exacerbating tensions between the world’s two biggest economies, now in the throes of sensitive negotiations to try and forestall an internecine trade war. It essentially ran out of inventory in the month since the ban’s imposition and had no way to replenish it. As of Thursday, its website and flagship smartphone store on Alibaba’s Tmall online marketplace had suspended sales. Carriers, including Australia’s Telstra Corp., stopped offering its devices.