ZTE pays $900 million fine

 

Chinese telecom equipment maker ZTE has agreed to plead guilty and pay up in a US sanctions case, drawing a line under a damaging scandal that had threatened its cut off its supply chain.

While the fine was larger than expected, ZTE, also a major smartphone maker, reported robust underlying earnings for 2016 and was upbeat in estimates for the first quarter.

A five-year investigation found ZTE conspired to evade US embargoes by buying US components, incorporating them into ZTE equipment and illegally shipping them to Iran.

It also made 283 shipments of telecommunications equipment to North Korea.

US Attorney General Jeff Sessions said in a statement that ZTE Corporation not only violated export controls that keep sensitive American technology out of the hands of hostile regimes like Iran’s, they lied … about their illegal acts,”

But ZTE relies on US suppliers for 25 percent to 30 percent of its components, many of which are key to its goods. It buys about $2.6 billion worth of components a year from US firms. This includes  Qualcomm, Microsoft and Intel.

ZTE Chief Executive Zhao Xianming said in a statement that his outfit acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company.

The company agreed to a seven-year suspended denial of export privileges, which could be activated if there are further violations, as well as three years of probation, a compliance and ethics program, and a corporate monitor.

It also agreed to an additional penalty of $300 million that will be suspended during the seven-year term on the condition the company complies with requirements in the agreement.

ZTE has replaced executives allegedly involved, including naming a new president.

The company said it slid to a preliminary net loss of $342 million in 2016, its first loss in four years, due to the settlement.