U.S. Suppliers Banned from Selling to ZTE

Reuters: U.S. bans American companies from selling to Chinese phone maker ZTE

The U.S. Department of Commerce is banning American companies from selling components to leading Chinese telecom equipment maker ZTE Corp for seven years for violating the terms of a sanctions violation case, U.S. officials said on Monday.

“This will be devastating to the company, given their reliance on U.S. products and software,” said Jacobson. “It’s certainly going to make it very difficult for them to produce and will have a potentially significant short and long-term negative impact on the company.”

“This is going to tank their stock,” Jacobson added.

ZTE has sold handset devices to U.S. mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp. It has relied on U.S. companies including Qualcomm Inc, Microsoft Corp and Intel Corp for components.

The news hit with Hong Kong closed. As for U.S. suppliers:

Shares of big U.S. ZTE suppliers fell on the Commerce ban. Acacia Communications Inc, which got 30 percent of its total 2017 revenue from ZTE, tumbled as much as 34.7 percent in early trade, hitting a near two-year low.

Shares of optical companies including Lumentum Holdings Inc fell 6.8 percent and Finisar Corp dropped 6 percent. Oclaro Inc, which got 18 percent of its fiscal 2017 revenue from ZTE, lost 17.4 percent.