ZTE focuses on the world s rich pickings(30160)

Overlooking a highway outside the southern Chinese boomtown of Shenzhen is a huge billboard advertising ZTE Corp that features a man in a martial arts pose and the slogan: "I m strong because I m focused."

At the company s nearby headquarters, however, ZTE s new president Yin Yimin makes it clear that appreciation for focus does not mean China s largest listed telecoms manufacturer plans to limit itself to the domestic market or core networking products.

This year ZTE is planning to concentrate on ramping up overseas sales even as it redoubles its efforts to become a significant mobile handset brand, Mr Yin says.

Although ZTE tripled overseas revenues last year to about US$600m, they still only account for one-fifth of total revenues, he says in his first interview with an international media organisation since his appointment.

"We cannot say the company is very satisfied," he says. "So this year we are going to approach the international market with greater determination."

The stress on overseas growth is something of a change for ZTE.

The company in the past has been more cautious about global expansion than its larger unlisted rival Huawei, which enjoyed overseas revenues of more than US$1bn in 2003.

ZTE s plans have implications for international telecoms hardware producers, which have already seen the low-cost Chinese producers squeeze margins at the low end of the telecoms network business.

ZTE is concentrating initially on easy-to-enter emerging markets in Africa and Asia - it already claims 50 per cent of the market in CDMA mobile network equipment in India. But, like Huawei, it has its eye on richer pickings in the developed world and has been talking to operators such as Britain s BT and Vodafone.

"Huawei and ZTE are gaining experience and scale, and will soon be coming to a neighbourhood near you," warns a recent report by telecoms consultancy BDA China.

ZTE, which is listed in Shenzhen and has long been interested in issuing shares in Hong Kong, expects to increase overseas sales 70 per cent this year to more than US$1bn.

ZTE will have to steel itself for a tougher market overseas than at home.

Few telecoms equipment markets can match the heady growth China has enjoyed over the last few years as operators have rushed to meet rapid growth in mobile and fixed-line subscribers.

ZTE s bets on domestic demand - particularly for equipment using the Personal Handyphone System (PHS) wireless and CDMA mobile phone technologies - have helped it largely to narrow the revenue gap with Huawei.

Still, things are likely to get harder for ZTE at home. One customer, operator China Unicom, is near to completing its new CDMA network and its capital expenditure is falling fast. Fixed-line operators are also sharply slowing the expansion of their PHS networks.

Executives say construction of "third-generation" mobile networks will not begin until 2005 at the earliest.

ZTE also faces challenges in its other area of diversification: its move into the consumer-oriented market for branded mobile handsets.

Handset margins in China have been sliced by fierce competition, while exports present issues of fashion and consumer taste that network equipment does not.

Mr Yin says ZTE wants to more than double handset sales this year to more than 10m units, lifting revenues from Rmb4.5bn to at least Rmb7bn.

But Mr Yin insists the handset push does not herald the kind of aggressive diversification into new product areas that has been all too fashionable among Chinese manufacturers in recent years.

"For the moment, we will still concentrate on communications products," he says.

ZTE focuses on the world s rich pickings

Related News

Photos

trade

market

finance