Without Qualcomm hardware, ZTE devices stand to lose their competitive edge, as they'll be forced to use chips made by MediaTek, as the only other alternative is Huawei-owned Hisilicon, who don't plan on releasing their SoCs for other companies. Meanwhile, the Chinese government has linked the fate of the company to the trade dispute between the two countries, raising the issue with top United States officials who traveled to Beijing last week for talks.
ZTE is interesting the ban.
In response to the crisis, ZTE claims it is taking steps to rectify the internal problems which led up to the ban, and a solution to the problem.
The Shenzhen-based company said it had ceased "major operating activities", in a filing late on Wednesday to the Hong Kong stock exchange. "The company is making active communications with relevant parties and seeking a solution". The DoC activated the ban in order to punish ZTE for failing to meet the requirements of a settlement reached previous year.
The US sanctions were the result of an investigation into alleged sales to North Korea and Iran that violated existing US sanctions against those countries.
A lot is riding on the U.S.
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Reports say that at least 25 percent of ZTE's components come from U.S. firms, such as Intel and Qualcomm, which supplies chips for its smartphones. The company sold about $116 million worth of chips and modules to ZTE previous year, accounting for roughly 30% of its annual revenue.
ZTE, which employs 75,000 staff and recently ranked as the fourth most popular smartphone maker in the United States, noted that it maintains "sufficient cash" to keep its commercial operations up and running for the time being, but the company has already suspended its online stores - now showing as "under construction".
While the company admitted it fired its four employees, it did not disclose that the rest of its staff received full bonuses rather than letters of reprimand.
"We fully understand high-tech factories' characteristic of fast-paced shipments of goods, we won't create obstacles for the pace of their exports", a trade official told Reuters on Monday.
The future of the company and its roughly 74,000 employees hang in the balance if a resolution is not found soon. Marick said ZTE has not given guidance on whether its phones can continue receiving software updates from Android, and discussions between the companies have been about ensuring ZTE can supply parts and service to honor phone warranties.
In a move that is roiling the telecom industry worldwide, a global telecom equipment-maker has halted its main business operations.