Optical Stocks Under Pressure After US Bans Sales To ZTE

Lloyd Doyle
April 16, 2018

United States' authorities issued an order on Monday barring U.S. exports of sensitive technology to Chinese telecom giant ZTE because of false statements made during an investigation into its illegal sale of goods to Iran and North Korea.

As part of the agreement, Shenzhen-based ZTE Corp promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them, senior Commerce Department officials told Reuters.

The agreement called for the company to pay $892 million in fines and forfeitures and be subject to an additional $300 million in penalties if it violates the terms of the settlement. The company also made false statements during a reprieve it was given and then again during its probation. "That was in response to the U.S. asking for the information". We can't trust what they are telling us is truthful, and in global commerce, truth is pretty important. "And in worldwide commerce, truth is pretty important".

A lawyer representing suppliers to ZTE said that this ban is "highly unusual" and that it will be "devastating to the company".

ZTE officials did not immediately respond to requests for comment. "It's certainly going to make it very hard for them to produce and will have a potentially significant short and long-term negative impact on the company". The official, speaking on the condition of anonymity, said the timing of the ZTE action was unfortunate because it could seem related to USA steps to stop alleged theft of intellectual property.

Shares of other optical companies including Lumentum Holdings Inc fell 6.8 percent and Finisar Corp 3.7 percent. After the USA placed export restrictions on ZTE in 2016 for Iran sanctions violations, the China's Ministry of Commerce and Foreign Ministry criticized the decision.

"ZTE misled the Department of Commerce".

ZTE agreed in March of a year ago to plead guilty and pay as much as $1.2 billion for violating USA laws restricting sale of American technology to Iran. The US government had allowed the company continued access to the USA market under the 2017 agreement. ZTE used third-party companies to hide the export of USA components to the sanctioned countries and then hid the information by "sanitizing databases" with information on the sales.

The penalty is steep, given that USA companies are believed to provide more than a quarter of the components used in ZTE telecom equipment and mobile devices.

Other reports by Iphone Fresh

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