Acacia updates on business relationship with ZTE

Acacia Communications will continue its suspension with ZTE unless and until the U.S. Department of Commerce implements the settlement by removing ZTE from the Denied Persons List, the timing of which is uncertain.

Acacia Communications, a leading provider of high-speed coherent optical interconnect products commented on recent announcements regarding a settlement agreement between the U.S. Department of Commerce and Zhongxing Telecommunications Equipment (ZTE) of Shenzhen, China may ultimately allow Acacia to resume its business relationship with ZTE.

On June 7, 2018, Secretary of Commerce Wilbur Ross announced that ZTE has agreed to severe additional penalties and compliance measures to replace the U.S. Commerce Department’s Bureau of Industry and Security (BIS) denial order imposed as a result of ZTE’s violations of its March 2017 settlement agreement.

Under the new agreement, ZTE must pay $1 billion and place an additional $400 million in suspended penalty money in escrow before BIS will remove ZTE from the Denied Persons List. These penalties are in addition to the $892 million in penalties ZTE has already paid to the U.S government under the March 2017 settlement agreement.

ZTE is also required under the new agreement to replace the entire board of directors and senior leadership for both entities. Finally, the new agreement once again imposes a denial order that is suspended, this time for 10 years, which BIS can activate in the event of additional violations during the ten-year probationary period. These collectively are the most severe penalty BIS has ever imposed on a company.

Acacia has no knowledge about the impact of the ban on ZTE and its broader supply chain or the amount and timing of any demand that ZTE may have for Acacia products. If, at any time, Acacia determines that it is permitted to resume its business relationship with ZTE, it will do so only in full compliance with applicable rules and regulations published by the U.S. Department of Commerce in the Federal Register.