ZTE Launch ‘phablets’

China’s ZTE Corp, which launched its first basic mobile phone in Africa little more than 10 years ago, said on Monday it would sell more than 30 million smartphones this year, launch two phone-cum-tablet ‘phablets’ and reverse a decline in its handset profit margins.

ZTE, the world’s No.4 handset producer and fifth-ranked telecoms gear maker, has fared better than crosstown rival Huawei Technologies Co Ltd in mobile sales, but lags its local peer in its mainstay telecom equipment business.

Both have diversified into consumer gadgets, selling dongles, smartphones and tablets to drive revenue growth as the telecom equipment sector stagnates, and both have met stubborn resistance in the United States where cyber-security issues have kept the telecom equipment market largely off-limits.

ZTE, valued at $9.3 billion, has expanded its footprint in emerging markets and Europe, though it said last month it was scaling back operations in Iran due to sanctions over Tehran’s nuclear development programme.

ZTE plans to focus on its Blade and Skate handphone models, upgrading them rather than unveiling new models, and expects to also double its tablet PC sales this year, said executive director He Shiyou on Monday.

“As handsets contribute more to overall revenue, it will affect our profit margins. In 2012, our aim is to increase handset margins,” He told reporters on the sidelines of the company’s annual analyst conference in Shenzhen, where the company is based.

Gross profit margin for ZTE’s consumer gadgets division, which comprises mainly handset sales, was 15.18 percent in 2011, down 3.81 percentage points from a year earlier.

“We spoke to components suppliers recently and it seems that handset makers such as ZTE won’t be able to reduce their raw material costs,” said Nomura Securities analyst Huang Leping. “For ZTE to improve its profit margins, they will have to raise their average selling prices and to do so will largely depend on their sales in the North American and Japanese markets.”

 

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