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Optical Stocks Under Pressure After US Bans Sales To ZTE

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The U.S. blocked Chinese telecommunications-gear maker ZTE Corp. from exporting sensitive technology from America, alleging the company made false statements to U.S. officials.

ZTE pleaded guilty previous year in federal court in Texas for conspiring to violate USA sanctions by illegally shipping US goods and technology to Iran.

The agreement called for the company to pay $892 million in fines and forfeitures and be subject to an additional $300 million in penalties if it violates the terms of the settlement.

However, ZTE was also supposed to "discipline" 35 other employees, which the company has since admitted to having not done. The US Department of Commerce threatened to cut off ZTE from all its supply chain partners in the US, which ZTE avoided by paying almost a billion dollars in fines.

Shares of other optical companies including Lumentum Holdings Inc fell 6.8 percent and Finisar Corp 3.7 percent. Oclaro Inc OCLR.O , which got 18 percent of its fiscal 2017 revenue from ZTE, lost 17.4 percent.




"ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation", Commerce Secretary Wilbur Ross said in a statement provided to TechCrunch. "That was in response to the US asking for the information". We can't trust what they are telling us is truthful, and in worldwide commerce, truth is pretty important. "And in worldwide commerce, truth is pretty important". The official, speaking on the condition of anonymity, said the timing of the ZTE action was unfortunate because it could seem related to US steps to stop alleged theft of intellectual property. It has relied on US companies including Qualcomm Inc QCOM.O , Microsoft Corp MSFT.O and Intel Corp INTC.O for components.

This is a regulatory action and is unrelated to any ongoing trade-related actions.

The denial order against ZTE comes amid brewing tensions between the USA and China that have raised concerns of a trade war between the world's two biggest economies.

A five-year federal investigation found last year that ZTE had conspired to evade USA embargoes by buying US components, incorporating them into ZTE equipment and illegally shipping them to Iran. You can find the Department of Commerce's announcement here.

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