President Donald Trump said he was considering a new set of penalties for Chinese vendor ZTE to replace a seven-year export ban imposed last month that is threatening the survival of the company.
Trump said he was reviewing the issue as a favor to the Chinese administration. “As a favor to the president [Xi Jingping], I am absolutely taking a look at it,” he said.
ZTE could face a new fine of as much as US$1.3 billion as well as a management shakeup and strict new rules, Trump told reporters at the White House on Tuesday. However, he said that a deal with the Chinese authorities regarding ZTE has not been finalized.
“What I envision is a very large fine of more than $1 billion. It could be $1.3 billion. I envision new management, [a]new board and very, very strict security rules,” Trump said.
Trump said that the ban imposed by the Department of Commerce was also affecting US firms, which supply components, software and services to the Chinese vendor. “When I looked at it, I said, you know, they can pay a big price without necessarily damaging all of these American companies,” he said. Some of the U.S. firms being affected by the ban are Google, Qualcomm, Dolby and Acacia Communications.
Last month, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) banned American companies from selling telecommunications equipment and services to ZTE during a seven-year period after the vendor allegedly did not live up to the terms of an agreement that had been worked out after it illegally shipped telecom equipment to Iran and North Korea. In early May, ZTE said it had ceased its major operating activities due to the export ban imposed by the US government.
Last week, Trump had instructed the U.S Department of Commerce to find a solution to this conflict. Commerce Secretary Wilbur Ross said that he was considering alternative punishments for ZTE and that the Commerce Department would consider the question of easing ZTE sanctions “very, very promptly.”
However, Trump’s decision to explore a way to allow ZTE get back to business raised criticism from Republican and Democratic lawmakers.
ZTE is estimating losses of at least CNY 20 billion ($3.1 billion) as a consequence of the ban, Bloombergreported, citing sources familiar with the matter.
The sources added that some agreements previously signed by the vendor were suspended. ZTE is spending an estimated CNY 80 million to 100 million in daily operational expenses, according to the report. The Chinese company, which is the country’s second-largest telecom equipment maker, currently employs approximately 75,000.
The report also revealed that ZTE has a plan to rapidly start production of smartphones and telecom gear once the governments of the U.S and China reach a deal. – RCR Wireless