How we nearly lost the company ZTE

ZTE is not very popular in our market. If to speak about devices with the ZTE brand, interesting models, I am reminded of is that the flagship Axon.

Among the models of the sub-brand Nubia, in my opinion, more interesting machines. Despite the fact that we and those and others are rare, ZTE is actually one of the ten largest smartphone manufacturers in the world. And this is the only Chinese company in this segment, which was able to break into the American market. Moreover, the apparatus ZTE in the U.S. are sold by operators, which is very important for this country. Moreover, in the United States, the Chinese giant is in fourth place, behind only Samsung, Apple and LG.

In addition, ZTE is one of the world’s largest telecommunication giants. And here is the company recently appeared on the verge of collapse.

The story is as follows. At the time, the US had certain claims against ZTE. In particular, the company was forbidden to supply goods to Iran (because Iran has been under US sanctions), but the company ignored the ban. In the end, even in 2012, States sued ZTE in court, and last year the court ordered the company to pay a fine of $ 1.2 billion. Otherwise, ZTE would have waited for the problems. Among other things, the company was given three years probation. But he had failed.

The fact that ZTE was also supposed to dismiss a number of top managers responsible for the deals with Iran, however, the company not only did not, but also paid some of their prize. Apparently, the company thought that it will remain a mystery. But in the US learned and as a result the US Department of Commerce has banned American producers to sell ZTE’s products until 2025! Again, forbade American companies to sell the products of the company ZTE, and not Vice versa.

But this option for ZTE even worse. According to analysts, up to 30% of the components for their devices, the Chinese company bought from American companies. This platform Qualcomm, various controllers, chips, and so on. Without these products ZTE was threatened with collapse. Moreover, until the end and it was not clear, but, apparently, the ban applies to software solutions. And it Android. More precisely, the system itself is free, and to prohibit ZTE to use it, no one could, but Google probably also made the list.

Yes, ZTE could use the platform MediaTek and Samsung, but it would not solve all problems. In the end, ZTE has frozen all operations, and rumors began to attribute the company’s intention to sell the smartphone business.

The analysts argued that in 3-6 months ZTE and the United States still to resolve the conflict, it States he is also not profitable. For example, one American company to 30% of its products sold it ZTE, that is, the sanctions hit and the companies in the US. But more sanctions are working, the more money loses ZTE.

A little later intervened in the case, Donald trump. He said that will solve the problem though quickly achieve this failed, because not everyone in the US government supported the idea of reconciliation with ZTE.

But in the end a compromise was found. A few days ago, ZTE has resumed work on very stringent conditions. So, for starters, the company will pay $ 1 billion fine and another 400 million will be retained for the duration of the agreement. If ZTE during this time, and it is 10 years (!), no longer will violate the conditions of the United States, this amount will be returned to her.

Also, companies need to select new Directors and to introduce an independent coordinator who will monitor the activity of the company is 10 years.

At the end of may ZTE said that the damage from sanctions amounted to at least $ 3.1 billion, that is, in the end, it is probably a lot more.

The head of ZTE also brought official apologies to employees of the company, noting that this situation is a consequence of imperfect governance structure. Simply put, as so often happens in large corporations, some top managers have taken certain decisions themselves brokered the deal.

It’s hard to say what would happen to ZTE, if a compromise was not found. Such a big giant to move quickly is impossible, and means for maintaining a non-performing business is not infinite. Most likely, ZTE really would have had to sell part of the business to save another. Most likely, it was the business of manufacturing smartphones would be sold first.

It just shows that sometimes it is enough only one very significant error, even to an international Corporation on the verge of collapse.

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