Lumentum et al. Plunge on DoJ Huawei Probe; Ciena's Gain?

ZTE says US ban will 'severely impact' its survival and partnerships

The ban is the result of ZTE's failure to comply with an agreement with the government after pleading guilty in 2017 to violating trade sanctions against Iran and North Korea, the department said. The probe was first reported by the Wall Street Journal on Wednesday. ZTE agreed to pay $892 million in fines and forfeitures in the Justice Department deal, at the time the largest US criminal fine against a Chinese company, with additional fines if it failed to comply with the deal.

The U.S. Treasury Department's Office of Foreign Assets Control, or OFAC, which enforces sanctions, and the Department of Commerce are also looking into Huawei's transactions.

ZTE Corp., one of China's biggest tech companies, said Sunday that it is taking steps to comply with a USA technology ban and that it is seeking a solution to the issue it says threatens its survival. As we stated last week in the midst of the ZTE issue, it's possible that any export bans, fines, etc. could get negotiated away or significantly reduced.




A spokesman for the Justice Department declined to comment. The measure has yet to be finalized. This post by Doug Dawson outlines some of the moves in Washington against both Huawei and ZTE, two Chinese telecommunications manufacturing giants. Somewhat fueled by the fact that the founder of the company once worked for the Chinese government.

Following a somewhat gloomy outlook from Apple's main supplier of semiconductors, Taiwan Semiconductor Manufacturing Co., markets are also losing confidence in Chinese hardware makers.

We see Ciena (CIEN, $26.36, Buy), Infinera (INFN, 11.56, Hold), and possibly Nokia (NOK, $6.00, NC) as potential winners from any incremental sanctions against Huawei. Earlier this year, things escalated when carriers and, later, retailers pulled out from partnerships with Huawei, refusing to sell its smartphones.

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