ZTE eyes surge in smartphones

PUBLISHED : Tuesday, 24 April, 2012, 12:00am
UPDATED : Tuesday, 24 April, 2012, 12:00am


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ZTE, China's second-largest telecommunications equipment maker, plans to increase smartphone shipments to between 40 and 50 million this year from last year's 15 million.

The Shenzhen-based company also expects this year's gross profit margin on mobile devices to rise. The gross profit margin was 15.18 per cent last year, down 3.81 percentage points from 2010, though revenue from mobile devices rose more than 50 per cent to 27 billion yuan (HK$33.23 billion).

Smartphone shipments last year surged to 15 million from three million the year before, while revenue from smartphones climbed to 30 per cent of ZTE's total mobile phone sales. 'Our target is that in three years, smartphone shipments should reach 100 million,' said ZTE executive director He Shiyou.

ZTE ranked fourth in mobile- phone market share globally last year, according to research firm Gartner. 'I believe our market share will increase this year,' He said.

The company also expects sales of its tablet devices to double in 2012 year on year. It sold 700,000 ZTE-branded tablets last year.

The Hong Kong-listed company plans to increase the proportion of operating revenue derived from the sale of mobile devices to 50 per cent by 2015, according to He. 'The income structure of our group will change,' he said. 'We are confident the gross profit margin of terminals [which include tablets, mobile phones and data cards] will grow this year.'

'We worked on gaining market share last year. Now as we have achieved a certain scale, we are moving up the gross profit margin curve.'

He said ZTE products would increasingly move towards the middle and high-end markets, and it would launch a device he described as the 'next generation of Samsung's Galaxy Note' by the end of this year.

The company will announce its first-quarter results this week. It reported revenue of 86.3 billion yuan for last year, up 23.4 per cent year on year. However, its net profit, dropped 36.6 per cent to 2 billion yuan last year.

He said ZTE would strengthen its investment in the government and enterprise market: 'We will develop it into one of ZTE's pillar businesses in three years.'

Xu Ming, ZTE vice-president and general manager of the government and enterprise department, said the profit margin of these services, which included data communication products, enterprise and government networks, was higher than that of terminals.

'We expect to realise a revenue of US$2 billion from these services in 2012, up from last year's 8.8 billion yuan,' Xu said.

A research report by HSBC released yesterday set the target price of ZTE at HK$28. 'Many Asian operators have relied on a pre-paid-centric wireless voice model, making the shift towards a post-paid, data-centric model more difficult,' the report said.

'Global vendors, particularly fast-growing Chinese players such as ZTE and Huawei, see significant potential in a market segment that is underserved by players like Apple, RIM, HTC and Motorola.'