On March 23, 2022, ZTE announced that on March 22, US time, the Company received a court judgment ruling not to revoke ZTE's probation (i.e., the probation period will expire on March 22, 2022) without any penalty attached, and confirmed that the term of office of the Ombudsman ended on march 22, 2022.
After all, it is a good thing, but I don't know if there will be endless compliance regulations in the future, compliance spot checks from time to time, or countless compliance trainings? Now the speculation circle is full of cheers. So, is this ZTE winning the case in the United States? What does this really mean?
First, the first plate: why 5 years? Why is the compliance period over?
We should know that this compliance inspection period for ZTE was made in 2017, which was originally 3 years, but in 2018 ZTE announced that independent ombudsman James M. Stanton will be hired by ZTE until March 22, 2022.
However, according to an indictment released in the United States last March, a former ZTE research director and a Georgia Tech professor are suspected of conspiring to bring Chinese citizens to the United States for research at least between 2014 and 2018 while ZTE held ZTE-sponsored J-1 visas.
In fact, the employee has left ZTE in the early years, but ZTE has also been charged, and in this 22nd ruling, the judge found ZTE legally responsible for the actions of the former ZTE director. But the judge decided not to take any further action against ZTE, which led to the verdict.
Of course, this is good news for ZTE. Since ZTE pleaded guilty and accepted punishment in 2017, ZTE entered a "probation period", which was originally only 3 years, and the court sent an independent ombudsman, James M. Stanton, to ZTE and paid him.
The Ombudsman will continue to perform the duties set forth in Annex A (Revised) of the Plea Agreement of 2017 and the Consent to appointment of the Company Ombudsman of the U.S. Courts. At the same time, the court's amendments to the supervision conditions include the following main provisions:
A. Extension of the term of office of the Court-appointed Ombudsman until 22 March 2022;
B. Grant the Ombudsman the same authority as the SSA (United States Social Security Administration) Special Compliance Coordinator to have access to specific documents, information, facilities and personnel associated with complying with the Export Control Reform Act of 2018, the Export Administration Regulations and orders.
That is, the independent ombudsman, the special compliance coordinator agreed with the SSA, has the same authority to access and comply with the Export Control Reform Act of 2018, the Export Control Regulations and the specific documents, information, facilities and personnel related to the order, i.e. ZTE enters into bilateral supervision.
Second, let's talk about it again: is this A ZTE winning the lawsuit?
Since ZTE was sanctioned, the price it has paid has been: $892,360,064 in fines + five-year U.S. presence in supervision + management changes. This is also called winning a lawsuit? At most, this can only be called: the probation period has expired and the sentence has been executed.
In other words, I paid my money, and I had to be monitored for five years, and after five years I told you that I was doing well and that you were fine. No apologies, no compensation. However, one day, three thousand Yue Jia could swallow Wu.
We need to know that in 2018, the US Department of Commerce found that ZTE made false statements in disciplinary action against executives related to illegal shipments to Iran, so the company was completely banned from purchasing US parts.
As part of the Ministry of Commerce's agreement to lift the ban, ZTE paid a fine of $1 billion, while depositing a deposit of $400 million in third-party accounts (plus a total of $2.29 billion in cumulative fines in 2017), ZTE-related companies must change all boards of directors and management within 30 days, ZTE must hire a compliance team selected by the U.S. Department of Commerce to supervise the enterprise for a period of 10 years, this is a suspension, the United States has the right to reactivate the ban at any time in the next 10 years.
Notably, it was agreed to change its leadership and work with a second 10-year supervisor. Therefore, from October 2018 to March 22, 2022, ZTE was under the dual supervision of the Independent Ombudsman and the SSA, and March 22 was only the day when the Probation period ended in the United States and the Independent Ombudsman left. But the SSA Special Compliance Coordinator team ended its oversight in 2028, and the U.S. compliance oversight of ZTE is until 2028.
In any case, ZTE has attached great importance to abiding by laws and policies, operating in accordance with laws and regulations, and ZTE has carried out extensive trade and investment cooperation with hundreds of American companies, which has greatly promoted local employment.
In the end, what does it mean that the five-year compliance supervision period of ZTE sanctions ends?
Remember, the United States only spared you for the time being! This means that the five-year probation is over, and the previous charges will not be revoked, but there will be no additional punishment, and the matter will end here, but the people do not admit that they are wrong.
On the contrary, the us sanctions have undoubtedly hit ZTE very hard. In 2017, ZTE's revenue reached 108.82 billion yuan. However, after the US Department of Commerce restarted the sanctions ban in 2018, revenue fell sharply to 85.51 billion yuan, and a large number of enterprises in the upstream and downstream of ZTE were also affected.
Three years have passed, ZTE is gradually getting out of the "quagmire". According to the financial report, in 2021, ZTE achieved operating income of 114.52 billion yuan, an increase of 12.9% year-on-year, and net profit of 6.81 billion yuan, an increase of 59.9% year-on-year.
Among them, the most critical is in research and development, ZTE, which is "stuck in the neck", also pays more attention. According to the financial report, in 2021, ZTE invested 18.8 billion yuan in research and development, accounting for 16.4% of revenue, while its R&D personnel were 33,000, accounting for 46% of the total number.
We take the science and technology innovation board that emphasizes scientific research as a comparison, at present, the proportion of R&D investment of 331 companies in the sector in the first half of 2021 is an average of 14%, and the proportion of R& D personnel is about 30%, which is very powerful.
After all, the key part of the ban is that "ZTE will be banned from importing goods from the United States in any form" . Among them, the top part of the component technology of communication equipment such as chips is still firmly in the hands of American and Japanese companies, and people can catch your neck.
Therefore, autonomous control is the last word, otherwise it will be stuck in the neck one day. In any case, ZTE and other 5G plates, you can breathe a sigh of relief, after all, the sanctions in recent years are too fierce, and it should also rise sharply.
Therefore, the most fundamental contradiction returning to the ban is the lack of core technical capabilities in China as a whole. As a technology company, an emerging technology enterprise with the slogan of 5G pioneer, the core technology is the first competitiveness and productivity, less false head publicity, more down-to-earth diligence, erudition, interrogation, careful thinking, discernment and dedication.
Last words: ZTE is gone, but not necessarily
In my opinion, this is an American concession, that is, I withdraw what I did out of nothing, even if it is a concession to you. Specifically, before the dispute is hollow, the contradiction is created, and when the compromise is compromised, the original contradiction resolution is taken as a concession to achieve the effect of zero-cost blackmail.
It is estimated that the United States is not willing to do it, but as long as it is casually buttoned, ZTE is afraid that it will not have to compromise for a few more years. If you can't achieve autonomy and control as soon as possible, after being insulted, there will be "the next ZTE".