ZTE Tries to Calm Workers as Business Grinds to a Halt

ZTE regards the next two weeks as crucial to resolving a U.S. blockade that’s brought its main businesses to a standstill and choked off revenue, signaling the potential collapse, according to Bloomberg.

The No. 2 Chinese telecom equipment maker said it’s suspended all major operations. That means its three main divisions, network gear, devices and enterprise solutions, have all but halted sales and aren’t bringing in sizable income, a person familiar with the matter said. ZTE in an email to senior staff specified the coming fortnight as a “critical window“ and urged managers to calm employees.

The company remains intent on resolving a seven-year blockade Washington imposed as punishment for violating the terms of a 2017 sanctions settlement, then lying about it. That cut off access to the American technology it needs to build most of its products, from Qualcomm’s semiconductors to optical chips from Lumentum.

“The company is currently working hard to speedily resolve this impasse,“ read the email. “Don’t let inaccurate information and rumors unsettle us. Stick to your posts, rally your teams, and calm your troops.“ It didn’t elaborate on that two-week timeframe, which takes it roughly to the end of May.

ZTE’s increasingly precarious position is exacerbating tensions between the world’s two biggest economies, now in the throes of sensitive negotiations to try and forestall an internecine trade war. It essentially ran out of inventory in the month since the ban’s imposition and had no way to replenish it. As of Thursday, its website and flagship smartphone store on Alibaba’s Tmall online marketplace had suspended sales. Carriers stopped offering its devices.

Their best hope may be for intervention from Beijing  but that’s a long shot given rising tensions between the U.S. and China. The blow came just as ZTE was preparing to lead the country’s charge into the era of fifth-generation wireless technology, along with local rival Huawei. Major wireless carriers around the world are preparing to spend billions rolling out 5G networks. ZTE, which once harbored ambitions of vying with Apple in phones, has called the punishment “unacceptable“ and threatened to take legal action.

ZTE’s larger rival, Huawei, also faces heightened U.S. opposition. The justice department is said to be investigating its own compliance with American sanctions banning sales to Iran. The Pentagon has banned ZTE and Huawei phones for sale, and the Federal Communications Commission voted in April to ban federal funds from being used to buy gear from companies deemed a national security risk.