Bottom line: ZTE’s temporary relief from sanctions for illegally selling US products to Iran is probably contingent on its assistance in a broader probe of the matter, and could result in more arrests and sanctions against others in the case.
ZTE assisting in US probe
In a move that surprised me, Washington is indicating it might reduce the stiff punishment it previously announced for telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 000063) for illegally selling US-made equipment to Iran. In the past, Washington has shown little tolerance for Chinese companies that break the rules, even though Beijing often protests such inflexibility.
But this time is slightly different from the past, since it involves a single company rather than an entire industry. Still, this kind of temporary relief does seem a bit unusual for Washington. Accordingly, I suspect that ZTE is quietly cooperating behind the scenes with an investigation that could ultimately incriminate many other companies and individuals that helped it to circumvent Washington’s rules prohibiting the sale of US-made networking equipment to Iran. Read Full Post…
The following press releases and news reports about China companies were carried on March 22. To view a full article or story, click on the link next to the headline.
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Marriott (NYSE: MAR) Wins Back Starwood (NYSE: HOT) With New Offer (English article)
US to Offer ZTE (HKEx: 763) ‘Temporary Relief’ on Export Curbs: Official (English article)
Alibaba (NYSE: BABA) Reaches 3 Trillion Yuan Milestone Even as China Slows (English article)
Bottom line: ZTE will lose its appeal of tough US export sanctions for illegally selling high-tech equipment to Iran, as Washington sends a strong signal that companies engaging in such actions will face stiff punishment.
ZTE to appeal US sanctions
An increasingly frantic ZTE (HKEx: 763; Shenzhen: 000063) is working on several fronts in a bid to stop crippling US sanctions, after Washington determined the company illegally sold equipment to Iran. I used to be a strong supporter of compromise in China’s frequent trade conflicts with the west, and still believe that some form of compromise might be the best solution here.
But at the same time, the frequent tendency by Chinese companies to flout laws and agreements both at home and abroad shows that sometimes harsher measures are the only way to convince these firms to play by the rules. Accordingly, I do expect we could see Washington take a relatively tough stance against ZTE in this case, despite protests from Beijing and the potential for big disruption to the operations of one of China’s largest telecoms equipment makers. Read Full Post…
The following press releases and news reports about China companies were carried on March 17. To view a full article or story, click on the link next to the headline.
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ZTE (HKEx: 763) Said to Appeal US Export Ban After Lobby Efforts Fail (English article)
Ctrip (Nasdaq: CTRP) Reports Q4 and Full Year Results (PRNewswire)
BAIC, BYD, Dongfeng Motor to Use LeEco (Shenzhen: 300104) Car Internet System (Chinese article)
Terra Firma Rejects HNA Bids for Jet Leasing Group AWAS – Sources (English article)
ReneSola (NYSE: SOL) Announces Convertible Note and Share Repurchases (PRNewswire)
Bottom line: The closure of small smartphone maker Dakele marks the latest distress signal from the sector, with one or more larger, more familiar brands likely to close shop within the next 6 months.
The inevitable has finally happened in China’s 2-year-old smartphone wars, with word that a smaller player named Dakele has officially closed shop after running out of money. It’s not completely true to call Dakele the first victim of China’s smartphone price wars, since we saw a steady stream of bankruptcies among component makers that supply the actual brands toward the end of last year.
But Dakele’s closure does mark a major milestone, since it’s the first case I’ve seen of a sizable brand going bankrupt and probably signals more closures in the year ahead. Some of the most likely candidates for such closure, or perhaps purchase by another larger player, include mid-size brands like OnePlus and Smartisan, which have failed to find an audience and are probably losing big money. Read Full Post…
Bottom line: The US should penalize ZTE for violating trade restrictions against Iran, but should moderate the severity to acknowledge that Chinese firms are improving their adherence to global laws and standards.
ZTE assists with US probe
Two days after exploding into the headlines, US sanctions against ZTE (HKEx: 763; Shenzhen: 000063) continue to ripple through the news as the Chinese telecoms equipment maker faces major disruptions to its supply chain. Washington has determined that ZTE sold equipment from US companies to Iran in violation of export restrictions against the country at the height of an international dispute about its nuclear development program.
As a result of its finding, which comes after a 4-year investigation, all of ZTE’s US suppliers, including the likes of Microsoft (NYSE:MSFT) and Oracle (Nasdaq: ORCL), must now apply for export licenses before they can sell to ZTE. Media reports have indicated that Washington is likely to deny such license requests, as punishment to ZTE for violating the trade restrictions. Read Full Post…
The following press releases and news reports about Chinese companies were carried on March 9. To view a full article or story, click on the link next to the headline.
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ZTE (HKEx: 763) Urges Suppliers to Seek US Export Licensee: Source (English article)
Smartphone Maker Dakele Shuts Down as Backers Sever Ties (Chinese article)
ReneSola (NYSE: SOL) Announces Q4 and Full Year 2015 Results (PRNewswire)
The following press releases and news reports about Chinese companies were carried on March 8. To view a full article or story, click on the link next to the headline.
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Ant Financial Set to Raise $3.1 Bln, Valued at $50 Bln (Chinese article)
Jin Jiang (HKEx: 2006) Raises Accor Hotels (Paris: AC) Stake to 11.7 Pct (Chinese article)
Xiaomi Won’t Go Public Within 5 Years, Has 10 Bln Yuan in Cash – CEO (Chinese article)
China Media Capital Invests in Ron Howard’s Imagine Entertainment (Chinese article)
China Angered by Planned US Export Restrictions on ZTE (HKEx: 763) (English article)
Bottom line: ZTE will face major supply chain disruptions following new punitive US actions for violating UN sanctions against Iran, forcing it to lower its 2016 sales targets by up to 10-15 percent.
ZTE braces for US sanctions
Officials at telecoms equipment and smartphone maker ZTE (HKEx: 763; Shenzhen: 000063) got a rough start to the new week, after media reported the company was set to get punished by Washington for selling products to Iran in violation of earlier UN sanctions. The news quickly buzzed through the headlines, and prompted ZTE to request a halt to trading of its Hong Kong-listed shares. (HKEx announcement)
This particular case actually dates back to 2012, when reports emerged that the FBI was investigating ZTE for illegally selling US computer equipment to Iran at the height of tensions with the west related to its nuclear development program. (previous post) Crosstown rival Huawei also faced similar accusations at that time. Read Full Post…
Bottom line: The absence of most mid-sized Chinese smartphone brands from the world’s biggest telecoms show this week in Spain reflects their inability to mount serious global campaigns, and also growing financial pressures many are facing.
Mid-sized Chinese brands skip MWC
China’s crowded field of low-cost and mid-range smartphone brands may claim to have global aspirations, but you would never know that judging by their loud absence at the world’s biggest telecoms show this week in Spain. I’ll admit that I’m not personally attending this year’s Mobile World Congress in Barcelona, so I’m dependent on the show’s website and media reports to determine who is and who isn’t attending.
But based on my own findings, including talks with spokesmen from at least one of the big domestic brands, most companies are skipping this show that has emerged in recent years as a major venue for debuting new smartphones. There are several reasons for skipping the show, but I suspect that chief among those is costs. Read Full Post…
Bottom line: Xiaomi and Meizu are trying to expand their exports by working through third-party distributors, and could make a formal entry into the US later this year after studying the market for patent-related liability.
Meizu eyeing US?
After dancing around the edges of the lucrative but extremely competitive US market for much of the last 2 years, fast-fading Chinese superstar Xiaomi and up-and-coming local rival Meizu may finally be preparing to enter the market through tie-ups with local carriers. A flurry of new media reports say the pair of Chinese brands are already making the move via a tie-up that will see their smartphones offered by US Mobile, a virtual network operator (VNO) that uses T-Mobile’s (Nasdaq: TMUS) network.
But no sooner did the reports emerge that Xiaomi issued its own statement saying it had no plans to sell its phones in the US, and that US Mobile was not one of its authorized distributors. Meizu also said it has no announced plans to enter the US. What seems clear from all this is that both companies are probably talking with one or more distributors about selling their smartphones in the US and possibly other western markets, even though neither is quite ready to make a formal announcement. Read Full Post…
