Sina Finance quoted the first financial report that recently US suppliers that have cooperated with ZTE in the supply chain have basically stopped their supply and provided telephone, mail and on-site technical support services. According to ZTE’s US suppliers The people of Broadcom stated that since April 17th (Broadcom) stopped supplying the products, even local semiconductor company technical support can no longer contact ZTE engineers.
Another person in charge of the American chip company stated that the trade war is unwilling for everyone to see, but the U.S. government has issued this order and any company headquartered in the United States must abide by it. Affected, ZTE officials did not respond, but according to the statistics on raw material inventory in its annual report, it is generally one-twelfth of the total chip purchase volume in the year. This means that ZTE's chip stocking is only about one month or so. The production capacity, together with channel agent stocking, is expected to have a chip inventory of up to two months at the most, and the pressure on the supply of US suppliers has gradually increased.
According to people close to Broadcom, after the issuance of the US Commerce Department embargo, Broadcom initiated the process of disabling ZTE for the first time. From the perspective of external chip suppliers, Broadcom is a large chip supplier of ZTE Corporation. The purchase amount was more than US$1 billion. Internal personnel from an American software company that provides open source solutions also stated that the company received a notice on the 17th that it can no longer participate in any project related to ZTE.
The official of Intel stated that it has been aware of the orders of the US Department of Commerce and will abide by the requirements of relevant laws and regulations. It is understood that ZTE's core network products, including media gateways, session controllers, and group gateways, are all Based on Intel's high-speed FPGA chip, its user authentication, authorization and billing, operation and maintenance and management platform and other products are all based on Intel's X86 server. In the past, 5G cooperation, Intel and ZTE also have more interactive.
According to Yang Xu, Intel’s vice president and president of China, ZTE’s business will certainly have an impact on Intel. Any company headquartered in the United States will need to follow local regulations. The current situation is both complex and uncertain. Things are a warning to the entire industry. Any challenges that come must be met. Yang Xu pointed out that Intel has traditionally advocated technological innovation without borders. The first thing that comes to mind is the global market. Intel used to spend a lot of time in the past. In response to the challenges in the Chinese market, the future will continue to find opportunities for Sino-US companies to win together, eliminate conflicts, and find complementary points.
In the meantime, ZTE broke the grain while US companies themselves were hit hard. After the embargo was issued, the stock price of Acacia Communications, a Boston-based communications component manufacturer, plummeted 35.97%. The telecommunications and data communications market optical components, modules and sub-components System supplier Oclaro shares also fell 15.2%, communications semiconductor supplier Inphi Corp. shares fell 6%, and optical fiber product manufacturer and seller Lumentum Holding shares fell 9.1%. Currently, Acacia Communications' component business relies heavily on ZTE, which is It contributes 30% of sales; In addition, ZTE accounts for 5%-10% of Lumentum's sales and Oclaro's 17.5%.
ZTE Corporation issued a statement on the 18th that it has been informed that the U.S. Department of Commerce has initiated a refusal order for the company. The company is fully assessing the possible impact of the incident on the company and actively communicating with and responding to all aspects. The U.S. Department of Commerce has issued an embargo against ZTE. After the order was made, ZTE Corporation announced that it had suspended its listing in Shenzhen and Hong Kong since the 17th and yesterday issued a deferral to disclose its first-quarter earnings report in 2018 and continue its suspension.
The U.S. Department of Commerce announced on the 16th of this month that US companies were prohibited from selling component parts to ZTE for a period of seven years. In addition, the U.S. Department of Commerce’s Bureau of Industry and Security also fined ZTE with a fine of US$300 million.
2. ZTE requires all members to re-evaluate the law in Europe and America. Compliance exams must be completed to pass the exam.
ZTE Corporation, a Chinese telecommunications equipment manufacturer that was banned by the United States, is strengthening compliance management.
On April 19, according to news reporters from the sources, after the US activated the refusal order, ZTE’s senior executives took advantage of the mediation, and the remaining employees’ work remained normal. However, the company has been strengthening compliance management and required each employee to re Learn European and American laws, regulations, anti-bribery and other knowledge, to participate in the compliance exam to achieve 100 points (out of full) before passing.
When responding to investors' inquiries, the staff of the ZTE Securities Representative Office stated that the company is actively seeking solutions. If there is progress, it will be disclosed to the public. 'There will certainly be some impact on the company's business operations, but try to overcome it.'
On April 16, the U.S. Department of Commerce announced that due to ZTE's failure to perform some of the agreements in the settlement agreement, the U.S. Department of Commerce will ban U.S. companies from selling components to ZTE. The export ban will take effect immediately with a validity period of up to 7 years. .
Since ZTE’s main core components in its main business are mainly dependent on suppliers from the United States, the penalties imposed by the US will have a major blow to the company.
One of ZTE's suppliers, Intel Corp., stated on April 18: 'We have already learned the order of the US Department of Commerce and will abide by the requirements of relevant laws and regulations.' Intel officials stressed that this is a universal caliber.
However, the other two suppliers of Qualcomm, Qualcomm and Microsoft did not respond.
On the morning of April 19, China Securities Network reported that ZTE's legal department is conducting intense translation and argumentation against the US ban. It is reported that the U.S. Department of Commerce’s ban on ZTE involves a lot of professional legal provisions, and the translation work is tedious.
According to sources, ZTE has started to confirm each production process that is currently under way. The supply chain department or other activities do not involve the production of US-originated products. Some sources in the media quoted ZTE's inside sources as saying that ZTE is making a move to the United States. The Ministry of Commerce has applied for interpretive guidance on the prohibition of part of the password.
It is understood that since the US Department of Commerce announced the ban, ZTE has sent two internal letters to employees, and the second specifically emphasized the company's compliance management.
According to a previous report from CICC: ZTE has 1 to 2 months inventory of spare parts. If ZTE does not reach a settlement within a month or two, it will affect the normal production and sales of communications equipment and mobile phones.
3. ZTE is fully responding to the US Department of Commerce’s ban
The Shanghai Securities News learned that ZTE's legal department is working on a tense translation and argumentation against the US ban.
According to market sources close to ZTE, the U.S. Department of Commerce’s ban on ZTE involves a large number of professional legal provisions. Translation work is tedious.
It is reported that the United States has been brewing for ZTE for a long time. 'Actually, in the U.S. Department of Commerce’s statement, it was far-fetched to consider that 35 people inside ZTE had not been punished. Punishment of 35 people was not the content of the original settlement agreement. Sin, why do you have no words? ' The market source said. Shanghai Securities News
4. Reuters: ZTE replaced Chief Compliance Officer before U.S. sanctions
A ZTE source who knew the situation directly told Reuters that the company’s chief compliance officer and chief legal officer Cheng Gang had been dismissed more than a month before the United States imposed sanctions against ZTE this week.
The U.S. announced this week that it prohibited US companies from selling components and software to ZTE within seven years because ZTE repeatedly violated the agreement with the U.S. government with a false statement. This may cut ZTE's supply chain.
The source quoted an internal notice dated March 8 stating that Cheng Gang, chief compliance officer and chief legal officer of ZTE, was dismissed, but the contents of the notice did not explain the reasons.
"We felt something went wrong from Cheng Steel's unclear dismissal, but we didn't expect it to be such a serious matter," the source said. Sources also said that company employees are now worried that their work is not guaranteed.
According to sources, it is not clear whether Cheng Gang is still working for ZTE. As internal notices are confidential, sources are reluctant to be named.
Cheng Gang did not reply to the email and LinkedIn information sought for comment. Reuters failed to obtain Cheng Gang's phone number. ZTE did not reply to the phone and email.
The South China Morning Post issued the first report on the internal notice.
ZTE Corporation acknowledged in March 2017 that it illegally sold US technology to countries such as Iran, which had banned sales, and paid a high record-breaking fine of 890 million U.S. dollars to reconcile the matter.
Senior U.S. Department of Commerce officials told Reuters this week that as part of the agreement, ZTE promised to dismiss the four senior employees and imposed disciplinary penalties on bonuses or criticism for 35 others. However, ZTE acknowledged in March that Although the four senior employees were dismissed, no other 35 were disciplined.
The impact of this ban on ZTE is devastating. Nearly one-third of its key components such as chips are dependent on U.S. companies. ZTE is ranked fourth in the United States in terms of smartphone manufacturers.
ZTE delayed the release of its quarterly earnings report on Wednesday, saying it needed time to assess the impact of the US export ban.
The company continued to suspend trading in Shenzhen and Hong Kong stock exchanges.
5. U.S. sanctions against ZTE scholars: Taiwan's supply chain is cheap and affordable
According to the micro-network news, the United States recently announced that it has offered a 7-year ban on export concessions to ZTE and prohibited US companies from selling components to ZTE. The scholars believe that this move by the United States not only seriously hurts Qualcomm, which has a cooperative relationship with ZTE. It's not cheap.
Regarding ZTE being banned, Wu Jiyi, dean of the Taiwan Research Institute, said that it seems that the trade war between the two major powers in the United States and China has not yet stopped. The trade war will result in two defeats. It is expected that President Trump will govern from businessmen. From the angle of view, through the use of war to raise war, to fight for peace, to create commercial interests.
According to Liu Mengjun, the first director of the China Economic Research Institute in Taiwan, ZTE and Qualcomm have already cooperated on 5G. Today, the United States’ attack on ZTE not only shows that President Trump does not approve of the cooperation model between ZTE and Qualcomm, and It also shows that the progress of China Made 2025 in ICT may also be delayed.
According to the research organization Canalys estimates, ZTE's mobile phones use Qualcomm chips with a ratio of up to 65%. The market believes that Qualcomm will be affected, and Qualcomm mobile chip competitor MediaTek is expected to benefit.
Although the research organization estimates that MediaTek is expected to benefit, Liu Mengjun’s views are relatively conservative. Liu Mengjun said that MediaTek has a lot of US patents. If the United States wants to expand the interpretation, MediaTek’s cooperation with ZTE may also be implicated. Therefore, MediaTek may not be able to favorable.
Liu Mengjun emphasized that the US sanctions against ZTE are not only impacted by Qualcomm, and that future intellectual property (IP) related to the United States cannot be used in cooperation with ZTE. Therefore, 'the United States has blocked ZTE, and Taiwan factories will not be cheap. Can be 捡'.
Liu Mengjun said that ZTE has been sanctioned by the United States, and its competitors such as Samsung, Huawei, and OPPO may benefit from this; As for Taiwanese factories that have not made much progress in the development of smart phones, if they want to develop 5G, they can only cooperate with the United States.
However, in addition to ZTE, outsiders are worried that China’s largest telecommunications equipment company, Huawei, will follow the footsteps of ZTE’s revitalization. Wu Zaiyi said that the US-China trade war situation continues to ferment, and that semiconductors occupy an important position in the manufacturing industry in Taiwan. Concerned about follow-up development, it should be prepared to respond earlier.
Previously, the market believes that Taiwan Semiconductor Packaging and Testing Plant KYEC’s operations may be affected. In addition, ZTE mobile phone chip supplier Qualcomm will also be affected, and MediaTek is expected to benefit.
KYEC pointed out that customers' orders from mainland China's telecommunications equipment and mobile phone brands accounted for less than 10% of revenue, and they should have no major impact on financial services.
MediaTek also stated that according to the existing information assessment, there should be no significant impact on business conditions in the short term, and there will be no benefit.
6. ZTE Huawei was blocked by the United States, rural America worried about network communications
On Tuesday (17th), the U.S. Federal Communications Commission (FCC) voted 5:0 to prohibit the use of federal funds to buy network equipment from companies that were found to pose a threat to U.S. national security. This ban caused the U.S. rural areas. Concerns, because the small regional telecommunications operators that serve them just need these equipments to maintain their operations.
The ban will not come into effect until the second vote of the FCC. Although the manufacturer's name is not directly mentioned, it goes without saying that the top targets of the ban are Huawei and ZTE.
Huawei, ZTE has grown into a globally renowned communications equipment supplier. However, the US Congress’s 2012 survey stated that the equipment of the two companies may threaten national security. This has caused their business in the United States to be difficult to develop.
In fact, at present, Huawei has achieved some success in the rural areas of the United States. Some small regional operators cannot purchase equipment from other suppliers. Therefore, they turned their attention to Huawei.
According to the Wall Street Journal, many regional wireless operators, TV stations, and Internet service providers in the United States have used Huawei equipment and believe that their products are inexpensive and attentive. However, many of them rely on federal funds to purchase. And upgrade communication equipment.
For example, LHTC Broadband and East Oregon Telecom with 7,000 customers are Huawei customers.
The ban will limit these small operators from receiving support from the U.S. government-led Universal Service Fund. The fund is approximately US$8.5 billion in size to allow access to the Internet in remote areas of the United States. Many of these regions still rely on telephone communications today. It is not difficult to conclude that the above ban has blocked the way for these small operators.
U.S. local media commented that this move may expose these small operators to huge financial pressures and also reduce their ability to provide network services.
Before the voting began on Tuesday, the CEO of Eastern Oregon Telecom issued a statement in the Wall Street Journal saying, 'If we need to specify what equipment, how the balance of the market is balanced'.
He believes that the new legislation discussed within the U.S. government is more likely to be driven by nationalism and trade protectionism rather than real concerns about hacking and espionage.
In addition, on April 9th, the Rural Wireless Association, an organization headquartered in Washington, the United States capital, stated in an open letter that restrictions on the procurement of equipment will not only make it difficult to ensure national security, but also give it to many rural areas in the United States. And broadband networks in remote areas cause irreversible losses. This association represents small operators with less than 100,000 users in the United States.
When asked about the results of the voting, Huawei issued a statement emphasizing its independence from any government agency and accusing the US authorities of 'putting a series of untrue allegations against Huawei'.
'We are disappointed with the FCC proposal', Huawei added, 'If this resolution is passed, the choice of rural operators in the United States will become even less, and their users and enterprises will not be able to obtain reliable and convenient telecommunication services. '.
The FCC vote was conducted one day after the U.S. Department of Commerce prohibited any U.S. companies from providing components to ZTE. The U.S. Department of Commerce believes that ZTE has failed to punish 30 employees who helped to circumvent US sanctions against Iran. Reconciliation clause reached in June of the year.
In addition, in January of this year, Huawei’s cooperation with AT&T’s smartphones also failed due to US government intervention.
Last month, when the US Foreign Investment Committee (CFIUS) blocked Singapore Broadcom from acquiring American chip maker Qualcomm, it also joined Huawei.
CFIUS said in its letter of advice to block Broadcom's acquisition of Qualcomm: Acquisitions may weaken Qualcomm's competitiveness, making Huawei and other Chinese companies more influential in formulating 5G standards, and this will threaten US national security.
On the 17th, Huawei held a global analyst conference in Shenzhen. At the meeting, Huawei's rotating chairman Xu Zhijun expressed his dissatisfaction when he was asked how Sino-US trade disputes will affect his business plan in the United States. 'Explaining what is happening between the two countries. Trade frictions are certainly beyond my ability. Some things are not based on our will'.