China’s ZTE banks on high-end phones to lift 2015 shipments by a third

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HONG KONG/SHANGHAI – China’s ZTE Corp is banking on -end smartphones to help raise shipments by a third next year and establish a brand to rival Electronics Co Ltd and Apple Inc at home.

ZTE and other Chinese smartphone vendors are increasingly tapping the high-end sector as competition has pushed margins so narrow that their mainstay low-priced handsets in China are barely profitable.

The world’s ninth-biggest smartphone vendor launched its Nubia brand in 2012, while peer Huawei Technologies Ltd is gunning for high-end recognition with its Ascend series and Lenovo Group Ltd is touting its Vibe and K lines.

“We will make more and more premium smartphones,” ZTE’s executive vice- Zeng Xuezong told Reuters in an interview on Monday.

Shenzhen-based ZTE, which also makes telecommunications network equipment, aims to increase its global smartphone shipments from 40 million last year to 60 million this year, 80 million next year and 100 million in 2016.

“After our efforts in the past two years, I believe our brand awareness and approval rating from customers could rival those of Apple and Samsung in China,” Zeng said.

The introduction of fourth-generation (4G) networks in the world’s biggest mobile market is likely to stimulate demand for compatible handsets, so at least 60 percent of next year’s smartphone shipment target will be 4G-ready, Zeng said. That would compare with 40 percent of ZTE’s 2014 target.

ZTE told Reuters in April that shipments of its Nubia, whose Z5 model retails at about 2,999 yuan ($480), will grow at least 300 percent this year from last. Zhen on Monday said revenue in the terminal division as a whole should grow 15 percent.


ZTE’s feature-rich Nubia Z5, Huawei’s Ascend P7 and Lenovo’s Vibe Z are billed as high-end smartphones, but are priced around 2,000 yuan less than premium handsets such as Apple’s iPhone 5S and Samsung’s Galaxy S5.

Even so, more up-market handsets could help ZTE and its peers shed perceptions of inferior quality associated with Chinese brands – perceptions exacerbated by security concerns raised by U.S. government officials about Chinese-made communications equipment.

“There is indeed a gap between the brand awareness of Chinese companies and those top global brands, and this is what our team is trying to build for consumers,” Zeng said.

ZTE aims to raise its U.S. market share to 10 percent by 2017 from 6 percent last year by spending more on marketing.

The company, which last year released a smartphone in collaboration with the Houston Rockets basketball team, plans to increase its U.S. marketing budget by at least 120 percent this year from last, and its global marketing budget by 100 percent.

ZTE’s phone and tablet business accounted for around 28 percent of overall revenue last year. That compared with 54 percent from its division making mobile network equipment and 17 percent from its unit making network gear for corporate clients.

On Monday, ZTE said revenue this year is likely to grow more than 20 percent in its mobile network unit, and that revenue will surpass 10 billion yuan at its enterprise business.

ZTE’s Hong Kong-listed shares closed 2.3 percent lower on Monday versus a 0.7 percent rise in the Hang Seng Index. (Reuters)