Chairman of ZTE, the Chinese smartphone maker, Yin Yimin on Friday (June 8), apologised to staff and customers after the firm agreed to pay a $1 billion fine to the United States to end a supplier ban that has jeopardised its business.
The deal, which was made to have a US ban lifted, requires the company to overhaul its management and allow a US-chosen compliance team to be installed for 10 years.
The deal also allows China’s second-largest telecoms equipment firm to restart operations, reaffirm supplier relationships and rebuild trust with global clients, as it works to move on from an episode which it said threatened its very existence.
However, it could take at least a month for ZTE to ship phones again after the ban is lifted, while employees fear job cuts, wage reductions and a potential loss of customers, as the firm is set to reshuffle senior management.
The company agreed on Thursday to pay the fine and overhaul its leadership to lift the ban which has been in place since April.
The ban, which traces back to a breach of a U.S. embargo on trade with Iran, had prevented ZTE from buying the U.S. components it heavily relies on to make smartphones and other devices.
The case has become highly politicized and a key focus of whipsawing talks as Washington and Beijing look to avert a trade war.
In the memo sent to staff on Friday, Chairman Yin Yimin apologised to employees, clients, shareholders and business partners and said the firm would look to learn from its errors and hold those responsible accountable, a member of staff told Reuters.
“This issue reflects problems that exist with our firm’s compliance culture and at management level,” Yin wrote, according to the staffer, adding the incident was caused by the mistakes of a few ZTE leaders and employees.
“The activation of the denial order has caused huge losses for the company. The firm has paid a disastrous price.”
ZTE did not respond to multiple requests for comment.
“Paying the fine is no problem, the real difficulty lies ahead and getting future business, especially overseas. Market confidence is lost,” another employee told Reuters.
The person added that staff feared there would be pay cuts and possible job losses. “Bonuses are bound to be affected.”
Under the deal, ZTE will change its board and management within 30 days, pay a $1 billion fine and put an additional $400 million in escrow. The deal also includes a new 10-year ban that is suspended unless there are future violations.
A third member of staff said all ZTE employees were being called to have group meetings to “deeply reflect” on the case, including attending compliance training and writing up reports.
The management shake-up would also likely create instability – at least in the short-term.
“If so many bosses are gone at the same time, what would the succession process be like? There’s going to be lots of internal power struggles to come,” the third employee said.
The employees declined to be identified because of the sensitivity of the matter.