ZTE has continued its quiet renaissance with a double-digit hike in first-half earnings after recording growth across all lines of business.

Net income rose 12% to 4.6 billion Chinese yuan (US$665 million), with total revenue up 13% to CNY59.8 billion, China's no.2 telecom vendor said in a stock exchange filing.

Figure 1: Looking ahead, ZTE said it would increase investment in core technologies such as chips and network architectures.
(Source: Jordi Boixareu/Alamy Live News)

The strongest performance was in the core carrier equipment business, which boosted revenue by 10.5% and raised its gross margin by 2.5 percentage points.

The company remains heavily reliant on China's domestic market, which still accounts for 68% of total revenue – unchanged from a year ago.

The other two units, consumer and corporate and government, both grew strongly, but so did their costs.

Consumer revenue increased 16.5%, driven by the sale of handsets and smart home equipment, but operating costs rose 18.8%. The corporate unit grew 18.3%, mostly from domestic government demand, with costs up 19.5%.

ZTE said while its legacy operations made steady progress, the biggest growth spurt came from "secondary" products and solutions, including server and storage, vehicle electronics, digital energy and 5G industry applications, which together recorded 40% growth.

R&D expense was CNY10.2 billion ($1.47 billion), up 14.6% for the year, and accounting for just under 17% of total revenue.

Sub-vertical segments

Like some other Chinese companies, ZTE has begun pursuing sub-vertical segments, setting up teams to provide 5G and digital transformation services for mining and the metallurgical smelting companies.

Looking ahead, it said it would increase investment in core technologies such as chips and network architectures.

It said digital transformation, investment in new public infrastructure and new national projects such as the east-west computing scheme would deliver new development opportunities.

Want to know more? Sign up to get our dedicated newsletters direct to your inbox.

Since it completed the series of US-imposed fines and export bans for breaching Iran trade sanctions in 2018, ZTE has kept itself out of the spotlight as it steadily rebooted its business (see ZTE Fined Another $1B in Rescue Deal With US).

But it returned to the headlines early this month after being accused by the BIS, the Commerce Department's enforcement arm, of secretly trading with Iran through a third party (see ZTE, Far East Cable in US dock over Iran).

The deadline for ZTE's response to the charge is August 29. A ZTE spokesperson said the company would not comment.

Related posts:

— Robert Clark, contributing editor, special to Light Reading