Global Goals

ZTE Corp. strives to gain a foothold in next-generation mobile communications technologies

By DING WENLEI

The goal of ZTE Corp., the second largest telecommunications equipment and phone maker in China, has remained simple and unchanged for the past four years, continuing to push further into the European and American markets.

At the four-day Mobile World Congress (MWC), the world’s largest mobile technology fair,in 2006, the Chinese telecom giant proudly displayed its slogan“Making the World Converge,”a symbol of its commitment to global telecommunications.

While the company has altered its strategy since 2006, it has always kept its overall goal in mind. At this year’s MWC, the company focused on its variety of wireless terminal products, including handsets and data cards, rather than its system solutions.

The move is one of ZTE’s overseas strategies to burnish its brand by introducing more low-cost quality cell phones and data cards to overseas customers. The company ranked No.4 in the world in terms of handset unit sales in the last quarter of 2009 and sells cell phones to more than 160 countries.

“Sales of ZTE terminal products grew by more than 40 percent year on year in 2009 and we hope to keep growth around that fi gure this year too,” He Shiyou, Executive Vice President of ZTE, said at the fair. “Sales of wireless terminals surpassed 60 million last year. This year we expect to sell 80 million.”

While expecting healthy demand for its wireless handsets and data cards to continue,the company also anticipates subscribers for its handsets based on homegrown TD-SCDMA technology to increase by 500 percent this year.

Wide platform coverage

Predictions indicate that subscribers for mobile broadband connections would reach more than 3 billion in five years from the current 300 million worldwide creating a surge in demand for smartphones. Domestic handset makers such as ZTE and Huawei Corp. are gearing up to turn this growth into a pro fi t boost.

BETTER AND SMARTER: ZTE Corp., China’s second largest telecommunications equipment and phone maker, aims to sell more smartphones to developed markets

The number of mobile broadband connection users will witness “an explosive growth” when the average selling price of smartphones decreases to below $150 from above $300 in a couple of years, according to Xu Xinquan, vice president of Huawei’s terminal subsidiary.

“Everyone has to get ready for the turning point, be it Internet content providers or handset makers,” He told NetEase’s tech channel during the MWC.

ZTE debuted its ZTE Bingo, which they dubbed “the world’s first ultra-slim bigscreen BMP 3G smartphone,” at the fair this year, in addition to five smartphone models based on Google’s open-source operating system, Android.

BMP refers to the Brew Mobile Platform developed by U.S. wireless telecommunications giant Qualcomm. This, plus models based on Linux, Windows Mobile and OMS-platform phones already available on the company’s product portfolio, made ZTE one of the few handset makers to offer smartphones for a variety of mobile operating systems.

ZTE is also a member of the Symbian Foundation, a non-profit organization that manages the open-source Symbian platform,the successor to Symbian OS—the world’s No.1 operating system for smartphones used in Apple Inc.’s iPhone.

“We don’t have a large number of Symbian-based models, because the majority of our clients don’t have this requirement.But with a relevant technological repertoire,we are able to produce Symbian-based handsets if they want one,” said Xiong Hui,ZTE’s Vice President for handset marketing.

Tailor-made handsets

ZTE produces handsets largely for contracts from telecom operators. According to Xiong, the fact ZTE develops handsets according to operators’ contracts is conducive to ensuring the healthiness of its business.

“We need the right timing to promote services and software for 3G handsets, especially smartphones, and we haven’t launched the five Android models until operators inked contracts for them. That’s the way we develop handsets,” Xiong said, adding that this mode of ZTE’s handset development is unlikely to change in the next few years.

On the European market, operators including Vodafone, Orange,Telefonica and T-Mobile have all begun to purchase tailor-made handsets and data cards from ZTE.

A Goldman Sachs report says smartphone sales will grow by 38 percent in 2010. Earlier this year, ZTE established a European of fi ce for mobile phone operations to better tailor products for European customers and ensure a stronger market and brand presence.

“Smartphones will become a very important development direction for ZTE in 2010 in Europe and even worldwide,” said Lin Qiang, president of ZTE’s European offi ce for mobile phone operations.

ZTE’s bestseller in Europe last year was the X760, a 2G handset with sales of more than 1.5 million units, Xiong said.

“In contrast to the belief that 2G handsets aren’t selling well in Europe, the success of the X760 convinced us that Chinese phone makers still have chances to attain commercial successes overseas if they offer customers exactly what they want,” Xiong said.

ZTE’s next focus is the North American market, the largest single mobile phone market worth nearly $26 billion that accounts for approximately 20 percent of the global market.

The phone maker’s competitive edge in securing contracts from operators for tailormade handsets will help the company to achieve sales breakthroughs in the United States, another market dominated by telecom operators, although U.S. retailers generally abide by a no-questions-asked return policy for all products, Xiong said.

TD-SCDMA competence

In the home market, predictions claimed China would produce more 3G handsets than 2G phones this year. Domestic sales of ZTE’s wireless terminal products stood at nearly 20 million units last year, up almost 200 percent compared with 2008, Xiong said.

The MWC allowed ZTE to showcase its strengths and achievements in TD-SCDMA technology-based products.

Thanks to a final push for 3G telecom services in China earlier last year and increased spending by telecom operators on tailor-made handsets, ZTE sold TD-SCDMA(a homegrown 3G technology) handsets to 3 million of China’s over 600 million mobile services subscribers last year.

“ZTE is absolutely the number one in terms of last year’s sales of TD-SCDMA and CDMA handsets in the domestic market,” Xiong said. The company expects its new TD-SCDMA subscribers to exceed 18 million in the world’s largest mobile communications market this year.

Still, overseas sales generated about 70 percent of the company’s handset revenues last year. It has yet to promote TD-SCDMA-based handsets among users outside of China, Latin American and Africa.

A pre-4G foothold

In addition to its glitzy performance in the handset market, ZTE is striving to gain a foothold in researching and developing the next generation of mobile technologies.

It introduced its latest LTE-enabled data card, the AL600, at the MWC, pledging to introduce more LTE products this year.LTE, short for Long Term Evolution, is the last step toward the 4G radio technologies designed to increase the capacity and speed of mobile telephone networks.

Sales of ZTE’s data cards increased by more than 400 percent last year, Xiong said.

Nearly 2,000 engineers specialized either in system solutions or terminal products have worked together on LTE technologies and products for more than two years and will upgrade the technologies to support the TDSCDMA network this October, said Zhang Liang of ZTE.

“Small-scale commercial trials cannot be expected until the end of this year,” Zhang said.

LTE technologies and standards have won more supporters than other pre-4G technologies. China Mobile, which was licensed to construct and run China’s TD-SCDMA network, joined global operators such as UK-based Vodafone, Japanese NTT DoCoMo,American AT&T and Verizon in adopting LTE standards. With the help of Motorola,China Mobile will provide a TD-LTE trial network with a much higher transmission speed at the Shanghai Expo starting this May.

ZTE has inked more than 10 contracts with operators worldwide to deploy trial LTE networks on the Chinese mainland,Hong Kong, Spain, Singapore, the United States and Hungary, He said. ■