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China's ZTE paid over $2.3 bn to US exporters last year, ZTE source says

ZTE paid over $100 million each to Qualcomm Inc, Broadcom Inc, Intel Corp and Texas Instruments, the official said



Chinese technology company Corp, which this month suspended its main operations after a ban on American supplies to its business, paid over $2.3 billion to 211 in 2017, a senior official said on Friday.

paid over $100 million each to Qualcomm Inc, Broadcom Inc, and Texas Instruments, the official said.

As one of the world's largest telecom equipment makers, ZTE relied on US such as Qualcomm and Intel for components.

The extent of the impact of the Commerce Department ban on was noted by the ZTE official, who was not authorized to speak publicly, as Chinese and US government officials discuss a Washington visit next week by China's top economic official.

In March last year ZTE paid nearly $900 million in penalties for exporting US technology to and in violation of sanctions.

In April this year, the Commerce Department found ZTE had violated the terms of last year's settlement and banned US from providing exports to ZTE for seven years. As a result, ZTE suspended its main operating activities earlier this month.

The Commerce Department ban on exporting goods to the Chinese network equipment and handset maker was discussed when a delegation led by US Treasury Secretary Steven Mnuchin met with Chinese officials in Beijing last week.

China requested that President Donald Trump back off his threat of tariffs on Chinese imports, treat Chinese investments equally under US security reviews, and reassess the ban on ZTE.

A May 1 formal request by ZTE to the for an immediate stay of the April 15 ban went unheeded, according to a person familiar with the matter. The order was causing "irreparable harm" to the company and partners, as well as millions of consumers, including those who own its phones and major network operators, the person said.

American are estimated to provide 25 per cent to 30 per cent of the components used in ZTE's equipment, which includes smartphones and gear to build telecommunications networks, analysts noted.

The US ban prevents ZTE from using some Qualcomm processors and Android devices with Google Mobile Services software, according to analysts.

ZTE paid over $100 million each to other in 2017 including chip makers Xilinx Inc and optical component company Acacia Communications and memory chip maker Sandisk, the ZTE official said.

Intel, Broadcom and Qualcomm declined to comment.

Qualcomm last month said it expected lost sales to ZTE to lower its earnings by 3 cents per share in the current quarter.

ZTE is not among Qualcomm's publicly disclosed largest customers, which include Apple Inc, Samsung Electronics Co Ltd and makers Oppo and Vivo.

None of the other companies could immediately be reached for comment.

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.

ZTE's failure to comply with the 2017 Commerce Department settlement included not reprimanding or cutting bonuses to 35 employees tied to the wrongdoing, and making false statements, the Commerce Department previously found.

ZTE self-reported the discipline issue and corrected the mistakes, the ZTE official said, adding that the failure was not part of the same misconduct that led to last year's guilty plea.

The official said the recent ban was a grossly disproportionate penalty that ignored the strides ZTE had made towards complying with US laws.

Chinese Vice Premier Liu He is expected to resume trade talks with the Trump administration this week, after discussions in Beijing last week yielded no agreement on a long list of US trade demands.

First Published: Sat, May 12 2018. 20:06 IST