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ZTE doubles 1H net on 5G and rebound in handsetsZTE doubles 1H net on 5G and rebound in handsets

China's second-largest vendor is increasingly reliant on its domestic market for earnings growth.

Robert Clark

August 30, 2021

2 Min Read
ZTE doubles 1H net on 5G and rebound in handsets

ZTE has more than doubled first-half earnings, buoyed by China's 5G rollout and a recovery in handset sales.

China's lesser-known comms vendor has unveiled a 119.6% jump in net income to 4.1 billion yuan (US$630 million), with revenue up 12.4% to RMB53.1 billion ($8.2 billion).

But it remains heavily dependent on the domestic market, which accounted for 68% of total sales.

Sales were flat in its core carrier equipment division, most likely because of the deferred expenditure by Chinese operators.

However, the unit trimmed costs by 10% and improved its gross margin by 6.5%, driven primarily by higher 5G margins, it said.

The other big improvement was in device sales, which spiked two-thirds to RMB12 billion ($1.9 billion) thanks to a leap in demand for home terminals as well as handsets.

It was the best performance by ZTE's consumer group since 2017. In the years since, it has continually lost ground to domestic rivals such as Oppo, Vivo and Huawei.

This year the company said it shipped 5G devices to 30 markets and carried out "a renovation of the brands, products and channels" in its consumer business.

ZTE's government and corporate business grew by a healthy 17.7%, reflecting higher sales from its China server business and domestic subsidiaries, ZTE said.

It increased R&D spending by a third to RMB8.9 billion ($1.4 billion), with a focus on chips, 5G wireless and core transmission and access networks. The research budget now accounts for 16.7% of total revenue, up 2.6% from last year.

In its guidance, the company said it is anticipating higher 5G shipments outside China.

Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading. Global 5G deployments were likely to "roll out in full gear in the future, underpinned by a maturing industry chain and [a] consistent supply of innovative applications driving a new boom for the communications industry," it said. As well as network sales, it expects demand for its 5G industry applications, corporate digital transformation and auto electronics. "We will increase investment in core technologies such as chip, algorithm and network architecture to assure our technological edge, while helping carriers to build highly competitive premium 5G networks in a speedy manner by supplying end-to-end solutions." ZTE's HKSE stock, which had already priced in the higher profit, fell 3.53% in Monday trading. Related posts: Chip shortage taking its toll on China 5G rollout — Robert Clark, contributing editor, special to Light Reading

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About the Author(s)

Robert Clark

Robert Clark is an independent technology editor and researcher based in Hong Kong. In addition to contributing to Light Reading, he also has his own blog,  Electric Speech (http://www.electricspeech.com). 

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