China’s ZTE to step up global expansion after posting solid first half profit

World’s fourth-largest telecommunications equipment supplier by revenue plans to sharpen focus on growing areas like 5G and the internet of things

PUBLISHED : Friday, 25 August, 2017, 2:50am
UPDATED : Thursday, 14 June, 2018, 4:53pm

What a difference a year makes for ZTE Corp.

China’s largest-listed telecommunications equipment manufacturer last year hoped for better days amid concerns over export restrictions for violating the United States’ long-standing trade sanctions on Iran and North Korea.

Shenzhen-based ZTE is now well-positioned to take on a leadership role in the highly anticipated next transformation of mobile networks around the world.

“We will seize opportunities ... to enhance our position in the worldwide market”
ZTE chairman Yin Yimin

Chairman Yin Yimin said in a regulatory filing on Thursday that the company aimed to sharpen its focus on key areas that include 5G mobile technologies, the so-called internet of things, cloud computing, and optical transmission and access.

“We will seize opportunities ... to enhance our position in the worldwide market,” Yin said.

ZTE, which is the world’s fourth-biggest telecommunications equipment supplier by revenue, reported a 29.8 per cent jump in net profit for the six months ended June 30, powered by growth at its mobile network equipment and smartphone businesses.

Its interim net profit reached 2.3 billion yuan (HK$2.7 billion, US$345 million), up from 1.8 billion yuan in the same period last year, as domestic carriers continued to invest in transmission and access systems for their 4G networks.

Total first-half revenue rose 13.1 per cent to 54 billion yuan from 47.7 billion yuan a year ago. International sales made up 40.2 per cent of overall revenue.

Shares of ZTE advanced 0.93 per cent to HK$19.50 at the close of trading in Hong Kong on Thursday.

“We believe ZTE’s near-term growth will be driven by market share gain in China, conversion of previously delivered equipment into revenue, improvement in handset profitability and cost control,” Jefferies equity analyst Edison Lee said. “5G remains a game-changer for ZTE, in our view.”

The range of ZTE’s so-called Pre5G equipment, which supports the evolution of 4G mobile networks to 5G, are now deployed in more than 40 countries, including the mainland, Japan, Austria, Singapore, Spain, Malaysia, Thailand and Indonesia.

ZTE was the world’s eighth-largest smartphone supplier in the quarter ended June 30, with shipments of 12 million units to corner a 3.3 per cent market share behind LG Electronics and ahead of Lenovo Group, according to Counterpoint Research.

In the US, the smartphone industry’s third-biggest market behind the mainland and India, ZTE seized an 11.5 per cent share in the second quarter to rank fourth behind Samsung Electronics, Apple and LG.

“The race for the third spot [in the US] has been closer than ever, as ZTE looks to close the gap with LG in the coming quarters,” said Jeff Fieldhack, a research director at Counterpoint, in a recent report.

In March, ZTE agreed to settle its case with Washington, and pay civil and criminal penalties totalling US$1.2 billion.