Factbox: U.S. bans sales to major Chinese telco equipment vendor ZTE

(Reuters) - The United States has banned American firms from selling parts to China’s ZTE Corp for seven years, a potentially devastating move for the telecoms equipment maker and exacerbating tensions between the world’s two largest economies.

FILE PHOTO: A ZTE Axon7 device is displayed at company's booth during Mobile World Congress in Barcelona, Spain, February 27, 2017. REUTERS/Paul Hanna/File Photo

Below are key facts about ZTE:


ZTE, China’s second-largest telecom equipment maker, is publicly traded but its largest shareholder is a Chinese state-backed enterprise.

The firm, set up in 1985, is 30.34 percent owned by Zhongxingxin, which was formed by three shareholders that include a subsidiary of state-owned research institute China Aerospace Electronics Technology Research Institute, and state-owned technology firm Aerospace Guangyu.

ZTE has shares listed in Shenzhen and Hong Kong and has a market capitalization of $19.62 billion.

On Tuesday, both the Hong Kong and Shenzhen-listed shares were suspended.


In 2017, ZTE agreed to plead guilty and pay nearly $900 million in a U.S. sanctions case after a five-year probe found the company conspired to evade U.S. embargoes by buying U.S. components, incorporating them into ZTE equipment and illegally shipping them to Iran.

The company agreed to a seven-year suspended denial of export privileges, activated upon any further violations.


Yin Yimin

Yin has been chairman and executive director of ZTE since 2017. He previously served as the company’s president from 2004 to 2010, and also led ZTE Capital and Zhongxingxin.

Zhao Xianming

Zhao has been president and executive director since 2017. He joined the company in 1998 and later led the firm’s research and development group before being promoted to chief technology officer in 2015. He served as chairman of the company from 2016 to 2017, a role he handed over to Yin.


In the year ended December 2017, ZTE reported 4.57 billion yuan ($727.53 million) in net profit, compared with a net loss of 2.36 billion yuan a year earlier.

Revenue rose 7.5 percent to 108.8 billion yuan. The Chinese market generated 62 billion yuan of revenue, or roughly 57 percent of the total. Excluding China, Asia contributed 14.5 percent, followed by Africa on 3.5 percent. Europe, the Americas and Oceania contributed 25 percent to total revenue.

The telecoms network business is ZTE’s biggest source of revenue, earning 63.8 billion yuan last year, or 59 percent of the total, while its consumer business, which includes smartphones, generated 32 percent. Government and corporate clients contributed 9 percent.


ZTE is China’s second-largest telecoms equipment maker after Huawei Technologies Co Ltd [HWT.UL] and one of the world’s leading network gear providers, competing with Sweden’s Ericsson and Finland’s Nokia.

In smartphones, ZTE, once one of China’s top smartphone sellers, shipped 44.9 million units last year, becoming the 9th largest vendor globally, according to research firm Counterpoint.

In recent years, it has lost ground to home rivals such as Huawei, OPPO and Vivo in China. In the United States, it is ranked the fourth-largest smartphone seller after Apple Inc, Samsung and LG Electronics Inc, according to Canalys.


Major suppliers include chipmakers such as U.S.-based Qualcomm Inc, South Korea’s Samsung Electronics Co Ltd, Taiwan’s Mediatek Inc, as well as optical component firms such as Acacia Communications Inc, Lumentum Holdings Inc, Finisar Corp and Oclaro Inc.

In its annual report, ZTE said it had bought goods worth 3.17 billion yuan from its largest supplier, which accounted for 5.5 percent of its supplies.

Purchases made from ZTE’s five largest suppliers amounted to 10.61 billion yuan, or 18.3 percent of its total supplies.

ZTE owns nearly half of Nubia Technology Co Ltd, one of its five largest suppliers. It did not identify the other four.


ZTE employed 74,773 employees in 2017. R&D personnel accounted for 38.7 percent of the total workforce.

Its annual R&D expenditure is equivalent to more than 10 percent of its sales revenue, as it operates 20 R&D centers in China, the United States, Sweden, France, Japan and Canada.

ZTE had patent assets of over 69,000 items as of end-2017.

Reporting by Sayantani Ghosh in SINGAPORE; Editing by Miyoung Kim and Christopher Cushing