ZTE signed $1.4 billion deal to get US ban lifted, report says

By JC Torres/June 5, 2018 8:46 pm EST

When Huawei was under pressure from the US government for its alleged role in state-sanctioned espionage, the Chinese OEM refused to bend a knee. ZTE, unfortunately, couldn't afford to be as unfazed. The seven-year sanction imposed by the US government has caused the Chinese smartphone and network equipment maker's operations to come to a grinding halt, which, in turn, prompted US President Donald Trump to swoop in to save the day. Now sources are reporting that ZTE has signed an agreement over the weekend that would finally get that export ban lifted, and it's bending over backward to do so.

ZTE's troubles began way back in 2012 when Reuters reported that ZTE was breaking the US embargo on shipping tech products to Iran. In 2017, the company pleaded guilty in a Texas federal court. I agreed to pay a settlement of $361 million, fire four senior employees, and discipline 35 others over the misconduct.

It did only the first two of those three, investigations early this year revealed. This prompted the US Commerce Department to impose a heavier sanction. US tech companies are prohibited from exporting hardware and software to ZTE. Considering those are the lifeblood of ZTE's businesses, the company announced it was halting operations until further notice.

Implying a change of heart, Trump tweeted that he directed the department to find ways to get ZTE back up and running again due to the loss of employment for hundreds of Chinese workers. He suggested higher fines, a management shakeup, and more concessions from the company. According to Reuters' sources, the agreement ZTE signed included the following:

• $1 billion fine plus $400 million in escrow, in addition to the earlier $361 million settlement

• Replace its board and executive team within 30 days

• Unfettered site visits without coordinating with the Chinese government.

ZTE isn't out of the woods yet, though. In addition to still not having any official confirmation, the very deal itself might be blocked by US own Congress. Both Democrats and Republicans are up in arms over Trump's compromise amidst pressures from China. Both parties believe that ZTE is a threat to national security and that the US should not remove the sanctions imposed earlier by the government.