ZTE Chairman Yin Yimin apologized to the company’s employees, investors, clients, and business partners in a Friday memo, having expressed regret over the firm’s problematic seven-week episode in the United States which saw it banned from purchasing any American technologies and crippled its entire business following its failure to comply with a 2017 settlement reached after it violated stateside trade sanctions placed on Iran and North Korea. Mr. Yin said ZTE will learn from the ordeal but acknowledged it was forced to pay a “disastrous price” for its negligence, adding that the original equipment manufacturer already incurred “huge losses” due to the issue.
The executive possibly wasn’t referring to the $1 billion fine ZTE agreed to pay on top of an $892 million one it was already hit with over the same problem last year; according to recent reports, the China-owned OEM may end up losing out on over $3 billion or close to 20-percent of its annual turnover due to lost sales resulting in its reputation being tarnished, in addition to the fact that some of its previously agreed contracts have been dropped by its clients and partners due to the ordeal. “Market confidence is lost” and generating sales in the future — particularly outside of China — will be the largest problem ZTE will have to address in the aftermath of the new settlement, one employee said in a statement to Reuters, asking not to be identified.
Besides the new fine, ZTE agreed to make another $400 million escrow payment which will be taken by the U.S. government in case of any future violations of its export regulations. Additional transgressions will instantly trigger a ten-year denial order as well, whereas the recently retracted one was given over a period of seven years, though even a much shorter timeframe would likely be enough to bankrupt the firm, rendering it unable to access crucial components for its smartphones and network equipment. President Trump mediated the deal with the goal of advancing Washington’s trade negotiations with China but the move is presently facing a bipartisan level of opposition in Congress, though it’s still unlikely to be blocked by U.S. lawmakers, many industry watchers believe.