ZTE Corp. (000063), China’s second-biggest maker of mobile-phone equipment, said the U.S. will become its biggest market for handsets and tablet computers by 2015 on rising demand for cheaper devices, overtaking sales at home.
China accounted for about 35 percent of ZTE’s handset sales in the first nine months of 2011, while the U.S. made up about 10 percent, He Shiyou, ZTE executive vice president and board member, said in an interview in New York yesterday. Shenzhen, China-based ZTE projects annual U.S. mobile-device revenue growth of more than 50 percent in the next three years, He said.
ZTE is relying on mobile devices to expand in the U.S., where selling network infrastructure has been “much more complicated” because of politics, He said. A report in January by the U.S.-China Economic and Security Review Commission, an independent 12-member panel that advises Congress, said gear from Chinese companies such as ZTE and Huawei Technologies Co., a larger rival, could pose security risks to U.S. networks.
“The mobile-phone market is easier to enter,” He said. “Our growth in the U.S. is important for us to improve our brand awareness and position globally.”
ZTE became the fourth-largest handset maker in the world last quarter as shipments rose 58 percent from a year earlier, research firm IDC said last month. ZTE took 4.9 percent of the global market, ahead of Apple Inc. (AAPL)’s 4.3 percent.
‘Brand Recognition’
“ZTE has quality products that could win over U.S. consumers over time,” Andre Smith, vice president of Boost Mobile, said yesterday in New York. Boost, Sprint Nextel Corp. (S)’s pay-as-you-go unit, started selling ZTE’s Warp, a smartphone using Google Inc. (GOOG)’s Android operating system, for $199 on Nov. 2. “Brand recognition is their biggest challenge in the U.S. and they need local partners to help find a path.”
ZTE’s U.S. growth forecast is “reasonable given the low basis,” Lan Kun, an analyst at Shenyin Wanguo Securities Co. in Shanghai, said in an interview. Lan estimates that about 25 percent of the U.S. market is the target segment for the types of lower-cost phones that ZTE makes. If ZTE gets a 50 percent share in that segment, it could make up about 12 percent to 13 percent of the overall U.S. market, he said.
“Most of ZTE’s products are low- or middle-end, and these things are better sold in developing countries like China and Africa,” Lan said. “ZTE needs time to update its products for the U.S. market.”
ZTE sees “no opportunity” in network-equipment deals with the biggest U.S. carriers in the short term as Sprint, AT&T Inc. and Verizon Wireless all have selected vendors for the next network standard, called long-term evolution, or LTE, Chen Lixin, head of ZTE’s U.S. business, said in the interview.
“We don’t have opportunity at the moment” for network- equipment sales in the U.S., Chen said. “Once opportunity occurs, we will grab it for sure.”