China’s ZTE receives relief to its supply chain operations

By Clinton Mbah / Edited 04/01/19

China’s Multinational Telecommunications Systems and Equipment Company ZTE is set to receive what can only be considered to be a huge repose for its current supply chain operations. This is thanks to the U.S President Donald Trump’s recent vow to get the company back into business in order to save the thousands of jobs that were previously at risk of loss.

The telecommunications giant’s supply chain operations had been suffering greatly under to the sanctions against it by the U.S. Commerce Department in April 2018. The sanctions banned any U.S. firms from selling to ZTE for seven years, and this effectively hindered the supply of key components such as semiconductors that are needed for the creation of a lot of ZTE’s products.

The sanctions were reportedly issued after the Chinese telecom company’s failure to comply with a prior agreement with the U.S. to not breach the sanctions against Iran. In what was considered a violation of the agreement, the company pleaded guilty to illegally shipping goods to Iran. As a result, all trade from the U.S. to ZTE was banned; leaving the company in what would be an uneasy situation that threatened its supply chain operations.

The blow of the ban to China’s second – largest telecommunication equipment creator was felt very greatly, as most of its manufacturing operations came to a standstill due to lack of necessary materials. It was effectively devastating to ZTE, since it relies on a number of American companies to supply as much as 30% of the components that are used in a lot of its equipment manufacture. The sanctions even resulted in the company eventually suspending its main operations, as said in an announcement that worried thousands of employees about the future of their jobs.

It was with the recent announcement on Twitter by President Trump that hope returned to the telecom systems giant once again as he stated that he and China’s President Xi were working on a way to get the company back into business, fast. Foreign ministry spokesperson Lu Kang expressed his appreciation for the positive position of the U.S. President, stating that close communications were underway on the details regarding the issue.

A number of American companies are also set to continue a good deal of their business dealings with ZTE, supplying numerous components that will be needed for various manufacturing operations. Telecommunications Equipment Company Qualcomm is among the companies set to benefit from this ban lift, as it was in the middle of securing a takeover of Netherlands’ NXP Semiconductors in a bid to expand its operations.

This is a move that is set to restore a good deal of ZTE’s supply chain functions, as communication lines between the two countries will once again be reopened, and business will resume. It will also be a huge relief to the many members of staff working in the telecom systems giant, as they will no longer worry about the fate of their employment.

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