ZTE’s management said the vendor expects to return to profits in Q3
Chinese vendor ZTE reported a net loss of CNY 7.8 billion ($1.1 billion) for the first half of 2018, in line with its earlier warning over the impact of an export ban imposed by the US government.
The vendor said it expects to return to a small profit in the third quarter of the year, of up to CNY 1 billion compared to CNY 1.6 billion a year ago.
ZTE also reported operating revenue of CNY 39.4 billion in the first half of the year, down 27% year-on-year, due to the suspension of its operating activities.
Operations in the Chinese market accounted for 65.3% of total revenue in the first half, ZTE said.
In the 5G segment, ZTE said it continues to increase investments in this technology, carrying out projects with over 20 carriers globally.
“The company’s 5G products and solutions are in sync with the global timetable for 5G commercialization and are ready for commercial launch, having undergone 5G testing and verification in association with customers.”
ZTE’s CEO Xu Ziyang recently said that ZTE’s network operating business will resume a normal growth during next year. Xu also said that the vendor will increase efforts in research and development, mainly in the chip segment, and strengthen ties with additional chip makers.
The Chinese firm had secured financing of around $10.5 billion in order to resume normal business, according to previous reports.
The seven-year export ban had been imposed by the Department of Commerce’s Bureau of Industry and Security (BIS) in March this year after it found that ZTE had violated sanctions the U.S. had imposed on Iran and North Korea.
In early May, ZTE ceased its major operating activities due to the ban, which did not allow U.S. firms to ship key components, including chips, to ZTE.
In June, the Trump administration reached a deal with China to ease the penalties, allowing ZTE to resume business. On July 13, Secretary of Commerce Wilbur Ross announced that ZTE had placed $400 million in escrow at a U.S. bank. Shortly after the deposit, the department lifted the denial order on ZTE. The escrow funds are in addition to the $1 billion penalty imposed by Commerce that ZTE paid to the U.S. Treasury.
Lawmakers from both parties had pushed to include a provision in the annual defense policy bill that would have blocked the deal, but the provision was stripped from the final bill that President Trump signed.
However, the National Defense Authorization Act, or NDAA, includes new regulations that ban government agencies doing business with Huawei and ZTE.
The bill prohibits the U.S. government and its contractors from buying certain telecommunications and video surveillance equipment from Huawei, ZTE and other Chinese communications companies. The ban covers components and services deemed “essential” or “critical” to any government system.
