ZTE’s strength in smartphones delivers increased profitability and brand value

CHINA: ZTE Corp. has exceeded the company’s target by more than doubling shipments of smartphones in 2012, delivering improved profitability for the terminals division.

The growth in smartphone sales helped ZTE post a gross profit margin of 16.8 percent in its terminals division in 2012, an improvement of 1.6 percentage points compared to a year earlier.

In the United States, ZTE’s smartphone shipments greatly increased, a reward for the company’s strategy to focus on high-end markets. In emerging markets including India, Indonesia, Mexico, Argentina and Russia, ZTE also achieved fast growth. In 2012, the distributors channel contributed 10 percent of ZTE’s terminal revenue for the first time.

The strong smartphone sales performance helped ZTE record RMB 1.87 billion of operating cash flow in 2012. ZTE also posted positive free cash flow and operating cash flow for the first time in three years.

“ZTE aspires to be the global leader in 4G, and shape the future of smart devices,” said ZTE EVP and Head of the Mobile Devices Division, He Shiyou. “For ZTE’s terminals business, 2012 was a year of transition that brought increased scale, profitability, and a higher profile. The shift to higher value will continue in 2013.”

The strong growth in ZTE’s smartphone business elevated the company to be the world’s No. 4 manufacturer during 2012, and helped offset decreasing sales of feature phone products.

Last year, ZTE unveiled its Grand series to strengthen the company’s positioning at the high-end of the market. ZTE generated 15 percent of its smartphone revenue in 2012 from sales of mid to high-end devices in 2012, and He aims to grow the proportion to 25-30 percent this year.

After a breakthrough year for ZTE smartphones in 2012, the company will redouble efforts to offer the best devices in 2013, focusing on 4G products that bring superior intelligence and user experience. ZTE will transition from a B2B business model to B2C and increase spending on branding and marketing to connect with end-users more closely, embracing the exciting opportunity presented by the 4G era.

The company will collaborate with operators to focus on high-end products, LTE broadband devices, intelligent integrated services, and product innovation, as well as integrate its e-commerce platforms to offer better and faster services for end-users. In Grand S and Grand Memo, ZTE has two of the strongest LTE devices debuted in the industry this year.

The Grand S is the new generation flagship smartphone and was the winner of the IF2013 design award. The Grand Memo is one of the highest-specification phablets on the market. ZTE’s U8910 LTE smartphone is among the first devices selected by China Mobile in its expanded 4G trial this year.

In the space of two years, ZTE has achieved meteoric growth in its smartphone business, while maintaining solid profitability. The company is firmly established among the world’s top-4 handset vendors. ZTE expects to achieve 30 percent growth in its smartphone revenue in 2013.

He said, “4G is key to ZTE’s future, and our capabilities in LTE give us a lot of confidence.”