As part of the agreement, Shenzhen-based ZTE Corp promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them, senior Commerce Department officials told Reuters.
The FT's report notes that Levy's letter also cites a recent settlement between ZTE and USA officials, in which the Chinese firm agreed to pay a $1.2bn fines for violating USA sanctions on North Korea and Iran. ZTE has been buying the hardware from the United States companies and using in its products which are later shipped to Iran and North Korea. A few years back, both Huawei and ZTE came under scrutiny after the U.S government raised concerns over the national security. The Department of Commerce warned that ZTE could be banned from sourcing from its USA suppliers and it avoided that by paying $890 million in fines and penalties. US versions of ZTE phones were found to have a backdoor in 2012.
The Commerce Department has determined ZTE made false statements to the Bureau of Industry and Security in 2016 and 2017 related to "senior employee disciplinary actions the company said it was taking or had already taken", the department said in a statement Monday.
Oclaro Inc (NASDAQ: OCLR) saw its stock fall by more than 15 percent as ZTE accounted for 18 percent of its 2017 revenue. The majority of the ZTE smartphones in the U.S. are sold by the carriers. In a letter seen by the FT, Ian Levy, Technical Director of The National Cyber Security Centre in the United Kingdom, has written to United Kingdom telcos, ZTE and Ofcom warning of the dangers of using ZTE products and services. With the ban, none of the carriers are allowed to sell the ZTE smartphones.
According to the report from Reuters, ZTE has often used components from US -based companies like Qualcomm, Intel, and Microsoft in its products. The company can resume purchasing these components from the US after seven years.
While ZTE can continue to sell its products in the United States, being unable to use parts from Qualcomm, Intel, and other US companies could prove to be devastating to the firm.
ZTE, which devised elaborate schemes to hide the illegal activity, agreed to plead guilty after the Commerce Department took actions that threatened to cut off its global supply chain.
Visitors pass in front of the Chinese telecoms equipment group ZTE Corp booth at the Mobile World Congress in Barcelona, Spain, February 26, 2018.