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ZTE’s main business operations stalled following the US ban

Chinese smartphone maker ZTE that has been plugged into the biggest crisis after being slapped with a seven-year U.S. export ban is forced to stall its main business operations in China, due to the disruption in the supply of key components.

ZTE, the fourth largest supplier of smartphones in the U.S., shipped nearly 46.4 million smartphones last year (according to IHS Markit). Since its major suppliers include big names from the U.S. like Qualcomm (QCOM), Intel (INTC), Acacia Communications (ACIA), and Broadcom (AVGO), the ban is said to threaten the Shenzhen-based ZTE’s survival. Estimates as per research firm Canalys reveals that nearly 65% of the ZTE smartphones are made up of Qualcomm chips.

ZTE relies on an array of components for its smartphones and gears. And the immediate aftermath of the ban led to ZTE halting its major operational activities due to lack of supplies from U.S. firms. The company revealed this in a May 9 filing to the Hong Kong Stock Exchange.

The sale of smartphones on ZTE’s online stores has been suspended. A few local carriers continue to sell the devices in the retail outlets, but are running out of stock and are soon expected to halt their sales. This dire situation compelled ZTE to shelve the annual general meeting to late June. Initially, the meeting was to take place on May 11.

ZTE halting its major operational activities due to lack of supplies from U.S. firms. The company revealed this in a May 9 filing to the Hong Kong Stock Exchange.

Though ZTE received some relief from the Taiwanese Chip Supplier MediaTek, it failed to solve the larger problem of ZTE. This is because the Chinese telecom gear maker relies heavily on Qualcomm’s chipset for its high-end devices, which cannot be replaced by MediaTek.

Early this week, ZTE said in a filing that it requested the U.S. authorities to reconsider their decision on the ban as it severely damages their business. The U.S. Department of Commerce imposed a ban after they found that Chinese telecom giant was guilty of breaching trade sanctions by shipping products to Iran. This ban has further added to the trade tensions between the worlds’ two largest economies.

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