ZTE USA has been busy promoting the Golden State Warriors (one of 5 NBA teams the company sponsors), but the company’s Chinese parent company has had other priorities recently. After securing a temporary reprieve from export sanctions that some say could have crippled the company, ZTE is replacing the three executives who signed the documents that explained how ZTE could use shell companies to bypass U.S. export restrictions on technology exports to Iran.
Shi Lirong, Tian Wenguo and Qiu Weizhao have reportedly been removed from ZTE’s top management team, which includes a president and seven EVPs. Lirong has been serving as ZTE’s president since 2010, and will now be replaced by the company’s former CTO Zhao Xianming.
Management rotations are a regular occurrence for ZTE, which said the executive changes are part of its normal schedule. The company did not comment on why it chose to replace those three individuals at this time. But Xianming told ZTE’s employees that going forward the company will focus on “legal compliance and anti-corruption processes.”
The U.S. government found out about ZTE’s noncompliance from internal documents, which explained the company’s strategy for selling technology to countries that the U.S. does not trade with, including Iran, North Korea, Syria, Sudan and Cuba. ZTE’s preferred method for doing business with these countries was to sell them non-U.S. goods, but if that did not work ZTE planned to sell U.S. goods through shell companies.
Last month, ZTE obtained interim relief from sanctions that would have required all U.S. companies to obtain a license before selling any goods to ZTE. The U.S. Commerce Department announced the sanctions in early March, saying companies should expect applications for licenses to be denied. Then in late March the agency agreed to lift the sanctions until at least June, while working with ZTE to ensure the company’s compliance with U.S. trade laws.
The sanctions were painful both for ZTE and for the U.S. chipmakers that supply the Chinese company with components for smartphones, wireless base stations and fiber optic networks. Qualcomm and Intel are both suppliers to ZTE. A smaller company called Oclaro said this spring it expected ZTE to represent more than 10% of its revenue during the current quarter.
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