ZTE hopes '15' will bring broader success in US

ZTE Corp hopes 15 will be a magical number in the United States this year.

Celebrating that number of years in the US market, the Chinese network equipment and cell-phone maker on April 11 unveiled the ZTE Geek - a smartphone powered by a powerful new Intel Corp chip, and the first to come out of ZTE's joint venture with the Silicon Valley chip-making giant.

Shenzhen-based ZTE hopes that the new phone can challenge rivals such as California's Apple Inc and South Korea's Samsung Electronics Co in the high-end mobile-phone industry, paving the way for a broader success in the US, one of the world's largest telecommunications markets.

Underscoring North America's importance to the company, in March ZTE created a separate business group dedicated to the region, headed by Senior Vice-President Cheng Lixin. Cheng told China Daily in an interview that the creation of the North American unit demonstrates ZTE's commitment to providing high-quality products and services in the region. "The organization will provide the capability to serve our carriers and the customers even better by providing more resources," the executive said.

With a range of mobile devices including phones, tablets, broadband modems and family desktop integration terminals, ZTE is the world's No 4 mobile handset maker, according to global industry analyst IDC.

Although the company has gained market share by selling inexpensive, entry-level smartphones in the Chinese mainland, most of its US success so far has come from selling its smartphones under other brands. It became the fifth-largest terminal vendor in the US by shipments last year, trailing Samsung, Apple, South Korea's LG Electronics and Illinois-based Motorola Inc.

As a handset maker, "we are well-positioned to grow in the US and also worldwide", Cheng said.

ZTE's efforts to crack the US telecommunications network equipment market have been buffeted by political headwinds. In October, a US congressional study claimed that telecom infrastructure equipment from ZTE and fellow Chinese telecom company Huawei Technologies Co represented threats to national security and urged US carriers to stop doing business with the companies. The Chinese firms rejected the report's claims as unfounded. Executives with Huawei, the world's second-largest supplier of network gear by revenue, have since said the company is reducing their investment in the US equipment market to seek expansion in other markets, although it said it is still very interested in selling mobile phones in the world's largest economy.

Despite its portrayal as a security risk, ZTE is no stranger to US business, with a list of American partners that has included Intel, Qualcomm Inc, Microsoft Corp and Google Inc. Underscoring the company's contribution to the US economy, Cheng said that in 2012, ZTE paid US companies about $15 billion, and supported 3,000 US high-tech jobs.

Amid its widely publicized struggle with US politicians, last year ZTE posted its worst annual financial results since the late 1990s, swinging to a net loss of 2.84 billion yuan ($460 million) from 2011 net profit of 2.06 billion yuan. Contributing to the decline were falling product prices tied to telecom carriers cutting costs amid challenging global economic conditions.

But a turnaround may be in sight. ZTE chairman Hou Weigui recently told China Daily that the company is likely to see a return to profit growth this year on improving industry conditions and tighter internal controls. ZTE now expects average annual revenue growth of 10 percent over the next five years, helped by increased network infrastructure spending by European telecom operators, and stronger demand from carriers in Asia and Africa. The Chinese leadership's recent signaling of its intention to support 4G mobile network construction continues the trend of good news for ZTE.

"We have adjusted the strategy. There is a lot of momentum to turn our company around," Cheng said. "I am confident there will be positive development along the way."

One of those developments is ZTE's new Geek smartphone, the product of a "strategic partnership" with Intel announced in March. The phone uses the latest Intel Atom Z2580 processor, said to be twice as fast as the Intel chipset that powers the phone's predecessor, the ZTE Grand X smartphone.

"ZTE is very excited about our cooperation with Intel," Cheng said. "It is an important part of our strategy for product development, both in terms of time to market and providing customers with a great handset experience." As the company marks 15th anniversaries this year in both the US market and in the handset business, the smartphone partnership with the Silicon Valley chip giant is timely.

Offering more powerful Intel chips in its phones helps ZTE to differentiate itself from other smartphone makers, who typically use lower energy but slower chips produced by Intel rival ARM.

For ZTE, the new phone and the Intel partnership symbolize technological progress and a potentially deeper foray into the US, the linchpin to the company's worldwide success.

"Our global presence," Cheng said, "depends on cooperation with companies like Intel in the US."