ZTE to devote 2 per cent of annual sales to develop world’s fastest 5G mobile networks

The largest-listed Chinese telecommunications equipment manufacturer will spend 2 billion yuan every year, equivalent to 2 per cent of annual sales, through 2020 to supply ultra-fast 5G networks to mobile operators around the world.

PUBLISHED : Thursday, 29 June, 2017, 10:49am
UPDATED : Saturday, 01 July, 2017, 4:51pm

ZTE Corp, China’s largest-listed telecommunications equipment supplier, will earmark at least 2 billion yuan (US$294 million) every year through 2020 for 5G research and development, revving up efforts to commercialise next-generation mobile networks designed to be 20 times faster than current 4G infrastructure.

Li Cui, a vice-president at Shenzhen-based ZTE, said the company would consider increasing its research and development budget in the coming years, as key markets around the world accelerate the pace of 5G deployment.

“From this year, ZTE is committed to strengthening investment in 5G,” Li told reporters on the sidelines of a 5G industry summit. “An annual 2-billion-yuan R&D investment will be the minimum in the coming years. It is certain we will slate more funds for research and development.”

Such expenditure on developing the relevant technologies behind 5G mobile networks represents about 2 per cent of ZTE’s revenue in 2016.

Everything you need to know about 5G

The new 5G mobile standard will also provide higher capacity than current 4G networks, allowing a higher density of mobile broadband users with higher reliability.

It is intended to support the advent of the so-called internet of things, a super network of networks that consist of internet-linked devices embedded in everyday objects that gather, send and receive data for analysis.

ZTE, the world’s fourth-largest telecommunications equipment supplier by revenue, now has 3,000 employees engaged in 5G research and development. The spending on 5G also includes the costs of field trials.

It was the first time that ZTE, which is listed in Hong Kong and Shenzhen, disclosed its research and development investment plan for 5G.

The International Telecommunications Union, the United Nations agency overseeing development of the IMT-2020 standard for 5G technologies, said recently that the universal specifications for 5G are on track to be in place by 2020.

ZTE is collaborating with key industry organisations and mobile network operators from home and abroad to promote the development of 5G technologies.

“ZTE is willing to go all out with industry partners in standards, spectrum, technology, architecture, practices and other ecosystem fields in order to make 5G a reality,” said company senior vice-president Zhang Jianguo.

Ma Hongbing, a deputy general manager at China Unicom’s network construction department, said the timeframe for the commercialisation of 5G on the mainland largely depends on the government’s policy directions, which currently remain uncertain.

A study by the China Academy of Information and Communication Technology showed that total 5G expenditure on the mainland was expected to reach 2.8 trillion yuan between 2020 and 2030.

Why China is set to spend US$411 billion on 5G mobile networks

Last year, ZTE completed extensive verification tests of its so-called Pre5G antenna system, known as TD Massive Mimo, with China Mobile in 50 cities across 29 provinces.

ZTE is facing stiff competition against its larger cross-town rival Huawei Technologies, the world’s biggest supplier of telecommunications equipment, in developing and marketing 5G equipment.

On March 8, ZTE agreed to pay a total US$1.2 billion penalty imposed by the United States government to settle the company's violation of long-standing sanctions on Iran and North Korea.

The company's Hong Kong shares jumped 4.4 per cent on Monday to close at HK$19.2 (US$2.5), hitting a two-year high. The shares retreated 3.3 per cent to HK$18.56 on Wednesday.