SHANGHAI (AFP) – Chinese telecom giant ZTE faces a grim future after ceasing major operations due to a US ban on American sales of critical technology to the company, raising the stakes in a trade spat between the world’s two largest economies.
The firm’s fate has added a new source of tension to trade talks between the two countries after Chinese officials raised objections to the US ban during negotiations with their American counterparts in Beijing last week.
ZTE’s fibre-optic networks depend on US components and its cheap smartphones sold en masse abroad are powered by US chips and the Android operating system.
Without access to such technology, the company has been forced to partially shut down. “Major operating activities of the company have ceased,” ZTE said in a filing Wednesday.
Its dimming prospects could further sour discussions just as China’s top economic official, Vice Premier Liu He, heads to Washington for another round of negotiations next week.
“The Trump administration has sent a clear signal to China through its attack on ZTE: compromise, make compromises” on trade, said Cheng Xiaohe, an international relations professor at Renmin University.
“Otherwise, we will kill you.”
He added that the US is also investigating another Chinese tech giant, Huawei.
A telecom components buyer specialising in ZTE products said he had seen the effects of the production halt ripple into the market, with prices for available ZTE goods jumping 50 percent or more.
“They’ve stopped production of all products that have chips in them,” said Mr Zhao, the buyer, who declined to give his full name, adding that if production completely stopped for a year, “all ZTE’s gear will become scrap.”
