Chinese telecommunications equipment and systems company ZTE Corp. is reportedly preparing to lay off about 3,000 of its employees, including a fifth of its smartphone division workforce, according to a report Friday.

Citing anonymous sources with knowledge of the plans, Reuters said ZTE will cut 5 percent of its 60,000-person global workforce in order to “streamline operations.” The company’s smartphone division will lose around 600 staff, mostly in China. Reuters said the layoffs were likely to take place in the first quarter.

However, one senior-level executive within the company said the layoffs could be even more severe, with up to 20 percent of its employees being shown the door. The cuts will also affect ZTE’s foreign businesses, with one local manager of an overseas unit telling Reuters he’d been ordered to cut 10 percent of the unit’s workforce. “I was also given names that must go because they had tried to apply for jobs at [rival] Huawei and are therefore branded as ‘unstable factors,’” the manager said.

The layoffs likely stem from an imminent ban on exports to the company by U.S. firms, which was imposed on ZTE by the U.S. Department of Commerce last March for allegedly using front companies to get around sanctions on sales to Iran. ZTE managed to win a series of temporary reprieves against that ban, but the last one is set to expire on Feb. 27. If the ban does come into effect, it threatens to severely handicap the company’s supply chain as it relies heavily on U.S. suppliers like Intel Corp., Microsoft Corp., and Qualcomm Inc. for its device components.

Figures from International Data Corp. indicate that ZTE’s smartphone business has suffered as a result of the uncertainty, with smartphone shipments falling by 36.5 percent in the last year, compared to 2015.

ZTE’s chairman Zhao Xianming hinted at the possibility of layoffs during his New Year’s speech to company staff, saying plans were afoot to streamline the company’s management structure.

“[The company has] encountered its biggest crisis in its 31-year history,” he said. “In 2017 … businesses that don’t fit our strategic direction or with low output performance will be shut, suspended, merged or reconfigured, improving the company’s core competitiveness.”

ZTE is currently the fourth-largest smartphone supplier in the U.S., with a 10 percent share of the market.

Image credit: ZTE via Facebook