(Yicai Global) April 17 -- ZTE Corp. has suspended trading of its shares after the US Department of Commerce banned domestic companies from selling products and services to China’s second-largest telecoms equipment maker, cutting off more than a fifth of its suppliers.
hares of ZTE [SHE:000063] traded at CNY31.31 (USD5) on the Shenzhen Stock Exchange before this morning’s halt, more than double what they were worth in the second quarter of 2017. The stock hit a 52-week high of CNY41.39 in November.
“The incident is beyond business rules and its development is beyond the company’s control,” an unidentified ZTE employee said, adding that the Shenzhen-based company was evaluating the ban’s impact and communicating with relevant parties.
The DOC yesterday announced a seven-year ban forbidding American companies from supplying the firm, Bloomberg reported. It claims ZTE made false statements to the Bureau of Industry and Security in 2016 and 2017 by failing to take punitive measures against employees involved in the illegal export of US products to Iran in March 2016.
“Instead of reprimanding ZTE staff and senior management, ZTE rewarded them,” said US Secretary of Commerce Wilbur Ross. “This egregious behavior cannot be ignored.”
ZTE gets between 20 percent and 30 percent of its component from US suppliers and has long-term partnerships with Microsoft Corp., Intel Corp. and IBM Corp, according to an analyst from China Merchants Securities. It has bought USD14 million worth of chips and equipment from the US in recent years to create 20,000 jobs, he added.
Risk to Global Carriers, 5G
The firm has a roughly 10-percent share of the global telecoms equipment market, but if it cannot reach a settlement with the US government in the next two months, it may affect global carriers and even the development of 5G networks, China’s largest investment bank China International Capital Corp. said in a report today.
The ban could trigger a new wave of turbulence amid the existing trade tensions between the US and China, an analyst at market researcher TrendForce added. The trade war reflects American concerns over China’s rapidly growing tech sectors, especially integrated sectors, he said, adding that the nation still has a long way to go to catch up with the US. Policy support and government funding are giving rise to domestically made chips, the analyst said.
China’s Ministry of Commerce today urged the US to create a fair, just, and stable legal and policy environment for Chinese companies. “The MOC will closely track the case and is ready to take necessary measures to protect the legitimate rights and interests of Chinese companies,” state news agency Xinhua quoted a ministry spokesperson as saying.
Editor: James Boynton