Economy

Acacia, Lumentum Gain As US To Lift Ban On ZTE Component Sales

Acacia, Lumentum Gain As US To Lift Ban On ZTE Component Sales

Republican and Democratic U.S. senators introduced legislation on Thursday that would roll back an agreement President Donald Trump's administration announced to ease sanctions on Chinese telecommunications company ZTE Corp.

That penalty was assessed following an investigation showing that ZTE had violated USA sanctions and had provided technology to Iran and North Korea. However, a Commerce Department spokesman said that "no definitive agreement has been signed by both parties".

According to Reuters, ZTE has signed a preliminary agreement that will lift the ban on United States companies providing ZTE with goods.

Mr Ross emphasised that the agreement was separate from trade negotiations between the USA and China. As a result, ZTE was banned from using USA -made components for 7 years starting from April 2017.

Both Republican and Democratic lawmakers threatened to take congressional action that could block or alter the deal, calling ZTE a threat to USA national security.

Secretary of Commerce Wilbur Ross said in a press release, "We will closely monitor ZTE's behavior". Some US lawmakers are already hatching a plan to scuttle the new deal and restore sanctions that stopped US firms from sharing technology and expertise with the company. The company was allowed continued access to the United States market under the 2017 agreement.

US companies Qualcomm (QCOM) and Intel (INTC) account for 43 percent of the materials used in ZTE's Chinese-made handsets and networking equipment, according to tech research firm IDC.

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USA intelligence agencies have concluded that ZTE poses a "significant" national security threat.

Republican Senator Tom Cotton of Arkansas and Democratic Senators Chris Van Hollen of Maryland and Chuck Schumer of NY introduced an amendment to the National Defense Authorization Act that would stop the president from offering ZTE a deal.

Several U.S. chipmakers, including Qualcomm and Intel, count ZTE as a customer.

But it came shortly after Chinese officials offered to buy an additional $70 billion in U.S. goods to cut the trade deficit, moving toward meeting one of Trump's central demands on trade. The first settlement with ZTE set a record for civil and criminal penalties in an export control case.

Back in April, the United States government announced a complete and total ban of any USA components manufacturers from selling to Chinese telecom and handset giant, ZTE (HKG:0763).

Shares in NXP Semiconductors NV rose 4.9 percent in NY after news of the ZTE deal was announced. Smaller makers of optical components, including Oclaro and Acacia, rely more heavily on ZTE's business.