ZTE Expects $3.1 Billion In Losses Over US Supply Ban: Report

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ZTE is expecting to incur at least 20 billion yuan ($3.1 billion) in losses over the supply ban imposed on it by the Commerce Department last month, Bloomberg reports, citing sources close to the Shenzhen-based tech giant. The company is said to have drafted a plan called "T0" that's meant to allow it to restart factory operations within hours of Washington lifting its sanctions, indicating it expects the situation to be resolved in the immediate future. ZTE halted most of its operations earlier this month, saying the United States ban prevents it from conducting day-to-day business. Without access to Qualcomm's chips and an up-to-date version of Google's Android operating system and apps, ZTE is effectively unable to design and manufacture contemporary smartphones in any price segment.

The company is presently weathering the regulatory storm with its cash reserves but it's unclear how large those savings are. Bankruptcy is still unlikely given how Beijing owns a majority stake in ZTE and would presumably attempt bailing it out with a loan before letting it go under. The multi-billion loss said to have been incurred as a result of the ban amounts to some 17-percent of ZTE's operating revenue in 2017 and covers both lost sales and existing contracts being dropped by some partners who were scared off by the sanction, as per the same report. President Trump yesterday signaled he will be pushing for another heavy fine on the company so as to compensate for lifting its ban and returning it to business, indicating that penalty may be in the ballpark of $1.3 billion. ZTE already paid $892 million last year after admitting to a conspiracy to violate U.S. trade sanctions imposed on North Korea and Iran, having failed to fully comply with the terms of its settlement with the Commerce Department.

The company is said to have failed to discipline 35 of its employees involved in the transgressions after agreeing to do so last year, with the Commerce Department also accusing it of lying to its investigators. ZTE argued the issue has been overblown and doesn't come down to intentional defiance but accidental omissions that have been self-reported to the U.S. regulator for the sake of transparency, having criticized the sanction as needlessly harsh and unfair.

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