ZTE revenues fall $2bn as US sanctions bite

Financial Times ^ | May 23, 2018 | Emily Feng and Louise Lucas

[Zhang Fei]

ZTE, the Chinese telecoms equipment maker, is estimated to have lost more than $2bn in revenue since the imposition of a ban on the supply of US components by Washington last month, according to calculations based on last year’s figures.

ZTE reported full-year revenues of Rmb108.8bn ($17bn) in 2017, or an average of $1.4bn a month. The US ban on supplying parts to ZTE — after the group was found to have violated sanctions against North Korea and Iran — was imposed roughly six weeks ago, implying lost revenues of more than $2bn.

The potential reversal of the US ban on trading with ZTE would mark a victory for American hardware suppliers, which need access to the Chinese market in order to remain globally competitive and have been alarmed by how ZTE has become a political bargaining chip, according to analysts.

“There’s commercial interest [in ZTE’s survival] within the US industry, and that’s why Donald Trump was willing to reach a compromise . . . It affects not just US jobs but also US companies’ ability to fund research and development and stay at the leading edge of technology,” said Mr Lee.

The costs borne by US businesses would continue to accumulate for as long as it takes the US and China to reach an agreement on ZTE, analysts said.

“What most people do not realise is that in Silicon Valley right now there is a lot of opposition to the ZTE ban, because so many suppliers sell parts to ZTE,” said a venture capital investor who splits his time between the US and China.

“[The ban] obviously necessitates that Chinese players have back-up options, and when they develop those alternatives, it hurts the US companies right back. Samsung and MediaTek have expressed interest to offer their components to ZTE

[Zhang Fei]

If the sanctions against ZTE are to stick, we will have to deny access to the US market any company that supplies ZTE.

[TBP]

Tighter!