China's ZTE apologizes, pledges reboot after agreeing to pay $1 billion fine to US

  • The chairman of ZTE apologized after the firm agreed to pay a $1 billion fine to the United States to end a ban that has crippled key businesses, including smartphones.
  • The ban had prevented the company from buying the U.S. components it relies on to make phones and other devices.
  • The ban on ZTE became a key focus in crunch trade talks between Washington and Beijing, and a deal to lift it was struck as U.S. President Donald Trump seeks trade concessions from China and negotiations continue to avoid a trade war between the world's two largest economies.

Lluis Gene | AFP | Getty Images
People walk in front of the ZTE stand at the Mobile World Congress on February 27, 2018 in Barcelona.

The chairman of ZTE apologized to staff and customers on Friday after the Chinese technology firm agreed to pay a $1 billion fine to the United States to end a ban that has crippled key businesses, including smartphones.

The ban, which traces back to a breach of the U.S. embargo on trade with Iran, had prevented China's second largest telecoms equipment maker by revenue from buying the U.S. components it relies on to make phones and other devices.

In addition to the fine, ZTE agreed to overhaul its leadership in exchange for lifting the ban. In a memo to staff, Chairman Yin Yimin said ZTE would look to get back into business as soon as possible, and hold those responsible for the breach accountable, a company source said.

"This issue reflects problems that exist with our firm's compliance culture and at management level," Yin wrote, according to the source, adding the incident was caused by the mistakes of a few ZTE leaders and employees.

He added the U.S. ban had caused "huge losses for the company" which had been forced to pay a "disastrous price."

ZTE did not respond to repeated requests for comment.

ZTE pleaded guilty last year to conspiring to evade U.S. embargoes by buying U.S. components, incorporating them into ZTE equipment and illegally shipping them to Iran, paying nearly $900 million in fines. The latest sanction in April was because ZTE lied about disciplining some executives responsible for the original violations.

The ban on ZTE became a key focus in crunch trade talks between Washington and Beijing, and a deal to lift it was struck as U.S. President Donald Trump seeks trade concessions from China and negotiations continue to avoid a trade war between the world's two largest economies.

Under the deal, ZTE will change its board and management within 30 days, pay the $1 billion fine and put an additional $400 million in escrow. The deal also includes a new 10-year ban that is suspended unless there are future violations.

Click to show more