China’s ZTE Pairs Lower-Profile Approach With Global Ambitions





ZTE’s booth at the Mobile World Congress in Barcelona.

ZTE
Last year, China’s object of great smartphone hype was Xiaomi Corp. This year, it’s Huawei Technologies Co. And all of that is just fine with ZTE Corp., the Shenzhen, China-based handset manufacturer that has outsold both of those companies in the U.S., and is setting its sights on the No. 3 position behind Apple Inc. and Samsung Electronics Co. in the lucrative market.

While lower-profile than its better-known domestic rivals, ZTE has carved out a steady, quiet niche in the crowded and competitive smartphone market—and it says that a coming global economic slowdown could boost its fortunes even further.

“You don’t necessarily have to make a lot of noise for people to get to know you,” says Waiman Lam, vice president for global mobile and technology at ZTE, in an interview. ZTE started out primarily as a white-label brand, making no-nonsense smartphones for carrier partners, before deciding to make a name for itself, slapping the ZTE logo on more and more of its devices.

To build its brand, it has bet aggressively on sports sponsorships, backing several National Basketball Association teams, including last year’s champions the Golden State Warriors, and sponsoring teams in region-specific favorites like European club soccer, Japanese baseball and Australian rugby.

But another secret to the company’s success, executives say, is its market positioning.ZTE executives are unabashed about pushing an “affordable premium” model, which they say puts ZTE at an advantage to Apple, Samsung and, increasingly, Huawei.

“It’s companies like ZTE that are making consumers aware that you don’t have to pay an arm and a leg to get a good experience,” says Mr. Lam, and with signs of global recession looming and handsets looking increasingly similar, that could position ZTE for strong growth. The company had a strong 2015, outpacing the global market to boost smartphone shipments by 16% to 56 million units.

In the U.S., ZTE now ranks behind Apple, Samsung and LG Electronics Inc. as the No. 4 vendor. It says its brand awareness is rising in the U.S., with about one-third of surveyed consumers familiar with its brand. It’s also increasing its focus on Japan, Australia and Europe, where it still relies heavily on white-label devices for sales. Jacky Zhang, the company’s senior vice president and head of mobile devices in Europe and Asia-Pacific, says he’s fine with Shenzhen-based Huawei getting all the hype.

ZTE’s plan is to outmaneuver Huawei by undercutting its aggressive crosstown rival on price. “ZTE is committed to ‘affordable premium’ in Europe, and with Europe’s economy not doing well and Huawei’s strategy of selling at a high cost, we have a great opportunity,” Mr. Zhang said.

ZTE says it’s also poised to expand globally thanks to a broader sales network than some of its domestic rivals, and its portfolio of 16,000 patents, three-quarters of which are tied to mobile devices, according to Mr. Zhang. The patent portfolio allows it to expand into developed markets without facing patent lawsuits or hefty licensing fees, he said.
Very important to their gloabal ambitions, and why Xiaomi has bought patents from MSFT.
“Every advantage that Huawei has, we have too,” Mr. Zhang says.

A spokesman for Huawei said the company’s policy was not to comment on rivals, but added that Huawei had a full range of products and price points. Aggressive pricing means a lower bottom line, as ZTE executives are quick to acknowledge. Mr. Lam said thatwhile it was hard for anyone not named Apple to turn a profit on smartphones, the company wasn’t overly focused with racking up big profit for the time being. “We just need to focus on gaining market share,” he said.