UPDATE 3-China's ZTE targets Apple, Samsung, eyes US prize

Tue Aug 9, 2011 3:52am EDT

* Says shipped 35 mln mobile devices in H1, up 30 percent

* Aims to ship 12 mln smartphones in H2

* Targets U.S. as largest market in 5 years

* HK shares down 0.2 pct, outperforms broader market (Recasts, adds details)

By Melanie Lee

SHANGHAI, Aug 9 (Reuters) - China's ZTE Corp has Apple Inc and Samsung Electronics in its crosshairs as it targets rapid expansion in the U.S. smartphone market.

ZTE, China's second-largest telcom equipment maker, is confident of beating its 2011 target of shipping 80 million mobile devices and its looking to make the United States its top market in three to five years, an executive said on Tuesday.

"Success in the United States is the proof required to say you have global success," said He Shiyou, executive vice president of ZTE and head of the firm's terminals division.

"It's like if you want to become a global film star. You have to go to Hollywood. There is no film star that is a global film star and not known in Hollywood," He said.

With smartphones now accounting for more than 50 percent of handsets in the world's biggest economy, there should be increased opportunities for late entrants such as ZTE.

The United States formed 10 percent of ZTE's handset business in 2010, behind Europe which makes up 15-20 percent and China at 35 percent. ZTE is hoping to accelerate growth in the U.S. market through ventures with T-Mobile, AT&T and Sprint .

"I think two years ago, or even a year ago, this is something that would be impossible to happen," said Alvin Kwock, a Hong-Kong based JPMorgan analyst.

"But at this point in time, when the penetration rate in the U.S. is exceeding 50 percent, when it comes to the next level of penetration, I do think some people would want a lower-priced smartphone."

CROWDED ARENA

In the first quarter, ZTE was ranked the sixth-largest handset maker by unit shipments globally, behind Nokia , Samsung Electronics, LG Electronics Inc , Apple and Research In Motion , according to Gartner.

Apple and Samsung Electronics ended Nokia's 15-year reign at the top of the smartphone sales rankings in the second quarter, researchers said on Friday.

Nokia had dominated the smartphone market ever since its 1996 launch of the Communicator model, but competition from its two nearest rivals and a slump in its own sales knocked it from first to third place in the three months to June as growth in the sector slows.

"For ZTE, we are watching Apple. Apple is number one and Samsung is number two in the world, so there will definitely be competition," said He, adding that ZTE has increased research and product development to better position the firm for developed markets.

ZTE has said it plans to launch LTE (long-term evolution) devices in the United States in the second half of this year and smartphones based on Microsoft's Mango operating system early next year.

In the first half of the year, ZTE shipped 35 million units and aims to ship 12 million smartphones in the rest of the year. The smartphones mainly run Google Inc's Android operating system. It sold 5 million smartphones in the first half.

ZTE manufactures a mix of low-end and high-end smartphones for Western markets and will roll out its star product, "Skate," in Europe this month. It will launch the phone in China within three months, He said. The firm was aiming to ship 1 million "Skate" phones by the end of the year.

Overall shipments, including cellphones, smartphones, tablet PCs and wireless dongles, rose 40 percent to 60 million units during the January-June period, according to ZTE.

CHEAP PHONES, DOMESTIC PLAYERS

ZTE, like its bigger Chinese rival Huawei , is hoping to rely on consumer devices to drive growth. Earlier this month, Huawei launched its first cloud computing smartphone to complement its range of lower-cost phones.

"Now I think it's a game for the low-end smartphones," said Zona Chen, an analyst from Samsung Securities. "I would say the competition is quite healthy and I'm sure whether it's Huawei or ZTE, they will have the chance to gain market share from the big guys."

China's Alibaba Group also recently launched its first self-developed mobile operating system and smartphone running on its cloud computing operating system.

ZTE Hong Kong-listed shares fell more than 10 percent on Tuesday before recovering to trade down 0.2 percent compared to a 2.7 percent drop in the broader index . (Additional reporting by Jerry Huang and Lee Chyen Yee in HONG KONG and David Lin in SHANGHAI; Editing by Kazunori Takada, Lincoln Feast and Matt Driskill)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.