Day-to-Day: ZTE and the Potential Impending Trade War Saga


Reading time ( words)

(Excerpt from the May 2018 Weiner's World column)

Nanya Technology, Taiwan's biggest DRAM chipmaker, will apply for a permit to provide chips to ZTE. The company said it has been notified about restrictions on shipments to ZTE, and that the ban would have limited effect on its operation. The company said on May 9 that it is preparing to apply for a permit to continue shipping chips to ZTE Corp. as export restrictions took a new turn due to a US-China trade spat.

Taiwanese semiconductor company MediaTek has already received approval to resume shipping chips to ZTE.

From press reports in Japan and China: ZTE, China’s second biggest telecom equipment maker, main business operations have ceased due to a ban imposed by the U.S. government. The U.S. ban prevents ZTE from using some Qualcomm processors and Android devices with Google Mobile Services software. The Chinese firm is trying to have the ban modified or reversed, it said in exchange filings late on May 9.

Hit with the seven-year ban on American technology exports April 16 for illegally shipping equipment to Iran, the company has halted smartphone sales in China. Since it does significant business with U.S. and Japanese parts suppliers, prolonged stoppages to production and sales will also worsen the impact on the global smartphone supply chain. Partly state-owned ZTE was also the ninth-largest smartphone vendor in China last year and fourth in the U.S. Ranked ninth in the world, the company is one of the first major victims of intensifying U.S.-China trade frictions.

A senior ZTE official said that the company paid over $2.3 billion to 211 U.S. exporters in 2017 including over $100 million each to Qualcomm, Broadcom, Intel, and Texas Instruments. In March of 2017 ZTE paid nearly $900 million in penalties for exporting U.S. technology to Iran and North Korea in violation of sanctions. American companies are estimated to provide 25% to 30% of the components used in ZTE’s equipment.

ZTE is also reported to have paid over $100 million each to other U.S. suppliers in 2017 including chip makers Xilinx and optical component company Acacia Communications as well as memory chip maker SanDisk.

The ban also hurts ZTE’s ability to provide services, such as repairs to infrastructure, to customers in other countries and regions in which it operates. ZTE provides services for 100 million users in India, 300 million users in Indonesia, and 29 million users in Italy, the official said.

President Trump tweeted on May 13, "President Xi of China and I are working together to give massive Chinese phone company ZTE a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!"  

On May 21 the impending U.S. and retaliatory China duties were placed on hold pending the outcome of a new framework under which China would increase its purchases of American agricultural and liquefied natural gas (and other) products, ZTE would pay a large fine while changing its board of directors, and China would also provide added protections for IP.

On May 22 China said it will reduce auto import duties from 25% to 15% effective July 1, following pledges to buy more U.S. goods and end restrictions on foreign ownership in the industry.

On May 25 a tentative agreement was reached with the U.S. administration under which ZTE would pay another fine ($1.3 billion this time) and buy a large number of components from the U.S. However, Congress is opposed to it based on what has been released so far.

The Wall Street Journal reported from Beijing on the May 26 that Chinese authorities are set to approve Qualcomm planned $44 billion acquisition of Netherlands-based NXP Semiconductors NV in the next few days, according to people familiar with the matter, in what would be another significant step toward easing frayed U.S.-China trade relations.

On May 29, the White House said that the administration would proceed with its proposal to impose 25% tariffs on $50 billion worth of goods from China, and place new limits on Chinese investments in U.S. high-tech industries.

The final list of covered imports subject to tariffs will be announced by June 15. Proposed investment restrictions will be announced by June 30. The tariffs and investment restrictions will take effect later.

The ZTE situation was resolved for $1 billion plus a $400 million escrow account which will be forfeit if it violates Iran and North Korea sanctions. The company must also replace its senior management within 30 days. The settlement with the U.S. has broader impacts (e.g., China may now sign off on Qualcomm’s proposed acquisition of NXP).

What’s next? Stay tuned!

Share

Print


Suggested Items

Just Ask John Mitchell: Advice on Selling Tech in Asia

09/24/2020 | I-Connect007 Editorial Team
First, we asked you to send in your questions for Happy Holden, Joe Fjelstad, and Eric Camden in our “Just Ask” series. Now, it’s IPC President and CEO John Mitchell’s turn! A regular PCB007 columnist, John focuses on many of the challenges affecting the global electronics industry supply chain. Over the years, he has served as an engineer, manager, and executive at a variety of companies and organizations. We hope you enjoy “Just Ask John.”

I-Connect007 Editor’s Choice: Five Must-Reads for the Week

07/17/2020 | Andy Shaughnessy, Design007 Magazine
Like a bad penny, COVID-19 just keeps coming back and affecting the PCB industry. This week, we saw more industry events going fully virtual—a trend that’s likely to continue. But as Chris Mitchell explains, the COVID-19 outbreak is also forcing lawmakers and organizations to work together for the good of the U.S. electronics supply chain. Sometimes, it takes a crisis to make everyone cooperate, so let’s celebrate these little victories.

Aurora Circuits’ Chris Kalmus Offers PCBs for Ventilators at No Charge

04/29/2020 | Dan Beaulieu, D.B. Management Group
Electronics manufacturers continue to step up to the plate during these uncertain times. In this interview, Dan Beaulieu speaks with Chris Kalmus, owner of Aurora Circuits in Aurora, Illinois, who announced on April 24 that his company would be offering PCBs for ventilators free of charge.



Copyright © 2020 I-Connect007. All rights reserved.