Semiconductors/Network platforms

ZTE wants to return to handset A-list

ZTE, once one of the world's top handset brands, wants to return to the top end of the smartphone game.

Since US-imposed penalties arising out of its illicit trade with Iran nearly caused it to shut its doors four years ago, the Chinese vendor has rebooted its business.

Last year it posted an operating profit of 8.7 billion Chinese yuan (US$1.25 billion) on revenue of CNY114.5 billion ($16.5 billion), overtaking its pre-sanctions level.

The networks division is still its core business, accounting for two-thirds of sales.

But CEO Xu Ziyang says terminals, including smart home devices and white label handsets for foreign telcos as well as branded smartphones, will be one of the company's main growth drivers.

ZTE is pinning growth hopes on devices, pipes and cloud.
 (Source: Jordi Boixareu/Alamy Live News)
ZTE is pinning growth hopes on devices, pipes and cloud.
(Source: Jordi Boixareu/Alamy Live News)

In a long profile in business magazine Caijing, Xu and other executives admit they had engaged in a lengthy internal debate over the future of the devices business.

They were all confident in the prospects of the networks and enterprises businesses, but were uncertain about the outlook for devices.

It wasn't because of current performance – ZTE boosted device sales nearly 60% last year.

Rather, they worried that the brand had no profile in the domestic consumer market, had not built a recognized flagship mobile phone for years and had limited channel capacity.

Xu told Caijing they concluded that the combination of devices, pipes and cloud would be enough to drive ZTE's development for the next ten years.

Targeting Fortune 500

He said he wanted the company to develop a high-end smartphone that could take it back to the front rank of domestic mobile brands.

Xu said the biggest challenge in the device business was deciding "what not to do, especially when it comes to popular products."

"Will we do VR and AR? Do we do something fashionable in the metaverse? Do we do some key applications in the digital infrastructure? Do we want to form an alliance? Do we want to transfer resources from traditional industries?"

Growth from devices is essential to the company's big ambitions. Chairman Li Zixue has declared its aim is to join the Fortune 500. With ZTE's 2021 revenue just under three-fifths of the lowest-ranked firm in the Fortune 500, that is a stretch.

But besides the healthy revenue growth, it has been hiring at a steady pace, taking on 5,000 graduates this year, the vast majority for R&D and technical roles.

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Executives told Caijing they are also seeking different types of hires from the traditional engineering specialist.

The company needs problem-solving staff who can engage in "cross-domain thinking" and "agile thinking," they told Caijing.

"The engineering nerd is gone, and the company needs to become cooler and more dynamic in the future."

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— Robert Clark, contributing editor, special to Light Reading

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