ZTE: Production returns to normal following deal over sanctions

New chairman and CEO claim the company has resumed production following swingeing US penalties

The new management at Chinese communications hardware vendor ZTE claim that production has returned to normal after the company's deal with US regulators.

The announcement means that US technology companies have started to resume their deliveries of key components without which ZTE is unable to produce its smartphones and networking equipment.

"As of today, the main operating business has resumed completely. The production mission for August has resumed to normal and R&D is resuming rapidly," the Securities Times newspaper quoted Chairman Li Zixue at a shareholder meeting at the company's headquarters, according to Reuters.

He continued: "We can definitely say the company is still in the front line in the communications industry… Our orders have been great and are in line with that of July and August last year."

While the current fiscal year's accounts are unlikely to be ugly, Li Zixue claimed that the company would return to growth in 2019.

He added that the company planned to increase research and development spending, particularly in the area of communications components, where the US government was able to hold the company to ransom over its sanctions-breaking sales.

ZTE was hammered with a seven-year US embargo in April after the company was found to be in contravention of a 2017 agreement with the US Department of Commerce over the busting of United Nations sanctions against Iran and North Korea.

The US Department of Commerce claimed that the company had not disciplined and sacked staff, including executive staff, behind the sanctions-busting sales, as it had agreed to do.

The penalty for breaking that agreement with the US Department of Commerce was a blanket ban on US companies conducting business with the company for seven years. The company's production lines ground to a halt within a month.

As ZTE relies on US-sourced parts for just under one-quarter of the parts that go into its products, the seven-year sales ban threatened to destroy the entire company.

However, President Trump offered a new deal to the company, which was overseen by US Secretary of Commerce Wilbur Ross. This deal required the payment of a new fine - of $1 billion - as well as a sum of $400 million to be placed in escrow to be paid to the US government should it contravene the new agreement. The board of the company also had to be replaced.