During ZTE’s annual general meeting today, the company accepted the resignations of its 14 board members, including its Chairman Yin Yimin.
The company named Li Zixue as its new chairman and as an executive director of the board of directors. And it named seven other new board members: Gu Junying, Li Buqing, Zhu Weimin, Fang Rong, Cai Manli, Yuming Bao, and Gordon Ng.
The clean slate comes as ZTE seeks to appease the U.S. Commerce Department, which has forbidden ZTE from buying components from U.S. companies for seven years. The Commerce Department imposed the ban because ZTE failed to comply with terms of a deal related to sanctions against Iran and North Korea.
The ban has essentially quashed ZTE’s business since it went into effect in April.
Since then, U.S. President Donald Trump has become involved in the imbroglio, tying the company’s fate to his larger international trade and tariff activities. Trump pressured the Commerce Department to work something out with ZTE. And earlier this month, the Commerce Department came up with a new deal requiring ZTE to pay an additional $1 billion in fines, make personnel changes to its top brass, and hire compliance officials picked by the U.S. government.
Today’s replacement of its chairman and board of directors is part of ZTE’s efforts to comply with that deal.
However, this still may not save the company. A large group in Congress wants the earlier 7-year ban to remain in effect. The legislators claim ZTE has close ties to the Chinese government, and its equipment poses a security risk to the United States.
It may prove difficult for ZTE to disassociate its business activities from the Chinese government to satisfy U.S. lawmakers. Reuters reported today that ZTE’s new chairman, 54-year-old Li, was the Communist Party secretary at a unit of China Aerospace Science and Technology Corporation.
And the entire new slate of board of directors was nominated by ZTE’s controlling shareholder Zhongxingxin, a state-owned entity that has a 30.34 percent stake in the company.
The sudden absence of a major telecom vendor has caused some big ripple effects. For instance, ZTE bought a lot of its components from Qualcomm, which has taken a sales hit since the ban. And ZTE, this week, pulled out of the Mobile World Congress trade show in Shanghai. It had planned to have a large exhibition space at the show, and many of its executives were scheduled to speak on topics such as 5G. But they cancelled their appearances.
Copyright: wolandmaster / 123RF Stock Photo