What is the best way to compete with Xiaomi in China’s smartphone market? For ZTE, the answer starts with a thinner product portfolio.
The Chinese telecommunication company, which ranks No. 1,220 on the Forbes Global 2000 List with a market capitalization of $7.18 billion, will shed a number of handset models to better focus on its voice-controlled Star series and the Grand line of phones, Zeng Xuezhong, chief executive officer of ZTE Mobile Services, told China Daily. Eva Chen, the company’s Shanghai-based spokeswoman, confirmed the details of the story. The strategy allows the company to focus on products with better margins, she said in a note to Forbes.
ZTE, headed by billionaire Hou Weigui, is failing to capture the Chinese market- the largest worldwide accounting for more than one-third of the world’s 292.4 million shipments- as it faces stiff competition from companies including the fast-growing Xiaomi and Huawei, which is looking to replicate Xiaomi’s success with a similar online business model for its Honor phones. ZTE’s China market share fell to 5% in the first quarter from 8% a year earlier, according to research firm Canalys.
Jason Low, an analyst at Canalys, said ZTE may trim the Blade, N and Q series- a move that would lead to a decline in short-term shipments. “ZTE currently does not have a key model or brands that are prominent and popular,” he says. “The decline in shipment will hurt ZTE’s mobile margin. For the long-term, if the flagship models sell well, it will help ZTE bring in more revenue.”
ZTE is having better luck overseas. The company’s smartphones are gaining steam in the United States, where it currently is the fourth-largest vendor after Apple, Samsung and LG, thanks to cheap prices and vigorous marketing efforts. That helps ZTE’s smartphone revenue to grow by 40% year-over-year, estimated Citic Securities, which currently has a buy rating on the firm.
