ZTE trumpets strong 2021 on back of 5G sales

ZTE revealed more details about its performance in 2021 after a recent profit guidance indicated that the Chinese equipment vendor is bouncing back after its costly brush with US authorities a few years ago.

Top-line figures show that revenue increased 12.9% to 114.52 billion Chinese yuan (US$18 billion), although the bulk of its business, somewhat unsurprisingly, still comes from its domestic market (RMB78.07 billion, or $12.4 billion). Net profit grew by a whopping 59.9% to RMB6.81 billion ($1 billion), although this is slightly below the mid-point of the profit guidance range.

While ZTE still makes most of its money from selling networks to carriers, its smaller consumer or gadgets business proved to be a key growth driver in 2021. Here, operating revenue increased 59.22% year-on-year to RMB25.7 billion ($4 billion) and accounted for 22.47% of total revenue.

ZTE partly attributed this positive development to the debut of the Axon 30 5G Series, which features an under-display camera with particular appeal for selfie-taking junkies. The vendor said its 5G products are now sold in more than 30 countries and regions, "while our home information terminal products achieved strong growth in scale with dispatch volume increasing by 50% year-on-year to 580 million units."

The carrier network business, meanwhile, produced a modest 2.29% increase in revenue to RMB75.7 billion ($12 billion) with a key focus on 5G network deployments. The government and enterprise segment increased by an acceptable 16.03% to RMB13 billion ($2.1 billion).

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ZTE also maintained its workforce at similar levels to 2020, and has seemingly moved away from a period when it slashed employee numbers from a peak of 84,622 in 2014 and 2015 to 68,240 in 2018. At the end of 2021, the vendor had 72,584 employees, slightly down from the 73,709 million at the end of 2020 but still up from the 70,066 reported for 2019.

Notably, ZTE has also been increasing the proportion of research and development staff in recent years, rising from 40.4% in 2019 to 46% in 2021.

ZTE rising

To be sure, ZTE has bounced back after its near collapse in 2018 when it was caught selling US technologies into Iran and North Korea, in breach of American trade sanctions, and hit with a billion-dollar fine. After a repeat infraction, the Trump government cut off one of its main oxygen lines – the supply of critical components made by US companies.

The taps only began flowing again when ZTE agreed to pay another hefty fine, sack managers implicated in the sanctions breach and be more closely supervised by US authorities. Had those supplies not resumed, the Chinese company would surely have gone out of business.

Unlike domestic rival Huawei, ZTE has also avoided the fate of being made a permanent fixture on the US Entity List, which names organizations prohibited from acquiring US-made technologies. Indeed, all the American attention has been on Huawei, a much larger Chinese vendor that seems to have been permanently barred from using US technologies. In addition, most of ZTE's business was always in China anyway.

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— Anne Morris, contributing editor, special to Light Reading

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