Shares of optical component suppliers fell sharply after the US Commerce Department announced export restrictions on Chinese equipment vendor ZTE for allegedly violating export controls on Iran.

Seven suppliers – Fabrinet, Finisar, Inphi, Lumentum, M/A-Com, NeoPhotonics and Oclaro – saw drops of between 4 per cent and 14 per cent on 9 March, the day after the sanctions went into effect.

Oclaro, which suffered the sharpest decline, may cut its sales outlook for Q3 because 10 per cent of its turnover comes from ZTE, C114.net reported.

ZTE suspended trading of its shares in Hong Kong and Shenzhen on 7 March after the US announced the export restrictions.

The Chinese government expressed its “dissatisfaction” after the US slapped ZTE with sanctions for having allegedly sold telecoms gear to Iran.

China’s commerce ministry issued a stern statement on its website following the US decision to require ZTE’s suppliers worldwide to apply for export licences before shipping any US-made equipment or parts to the Chinese company. The applications generally would be denied, the Commerce Department said.

C114.net noted that as China’s second largest telecoms equipment vendor, ZTE purchases billions of dollars of components from US suppliers, which will also face significant losses due to the restrictions.

Analysts said that top suppliers like Qualcomm and Intel will be able to pick up business from other device makers, but smaller component suppliers aren’t likely to have that option and will see revenue fall.

ZTE is likely to turn to non-US suppliers such as MediaTek.

C114.net called on China’s vendors to accelerate the development of core technologies to reduce the country’s dependence on foreign suppliers and gain more trading power to eliminate such political interference.

ZTE and Huawei both continue to face de facto bans on selling their telecoms equipment to US operators due to security concerns by the US government.