ZTE sees China, U.S. key smartphone markets

HONG KONG Tue Jan 17, 2012 5:46am EST

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HONG KONG (Reuters) - ZTE Corp, the world's No.4 handset maker, said it sees China and the United States as key drivers for its fast-growing smartphone market as it shifts away from low-end feature phones in a bid to boost profit margins.

ZTE, which has evolved from a seller of back-end telecommunications equipment into a well-known consumer devices name in emerging markets since it was founded in 1985, aims to rely on top models such as the Blade and Skate to build up its market share.

"The United States and China will be key engines driving our smartphone sales," Lv Qianhao, head of handset strategy, told Reuters in an interview on Tuesday.

The Shenzhen-based company, which launched smartphones powered by Microsoft Corp's Windows operating system in the United States in the second half of last year, plans to expand its rollout to include China no later than the third quarter of this year.

"If we say ZTE started out as a contractor, like those building mass housing that are value for money, then we want to be a developer of luxury high-end estates," said Lv, who also owns an Apple Inc iPhone as well as ZTE's Android and Windows smartphones.

Lv said ZTE expected its global smartphone shipments to at least double this year amid effort to boost profit margins in the competitive sector.

Its margins have been pressured by its previous focus on low-cost handsets and competition from other vendors such as Nokia Ojy, Samsung Electronics Co Ltd and Huawei Technologies Co Ltd.

In the first-half of last year, ZTE's profit margins for consumer devices, which include cellphones, tablet PCs, wireless cards and modems, fell 3.08 percentage points to 19.6 percent.

Lv said ZTE's smartphone shipments last year had far exceeded a target of 12 million as the Shenzhen-based company shifted to higher end smartphones from churning out feature phones to boost margins.

A senior executive said in September that it targets mobile phone shipment growth of 30-40 percent annually over the next three years.

The company had set a total shipment target of 80 million handsets for 2011, a third higher than shipments in 2010.

ZTE was the fourth-largest mobile phone maker by shipments in the third quarter, according to IDC, ABI Research and Strategy Analytics.

But it was ranked the fifth-largest handset maker by research firm Gartner, with a 3.2 percent market share, trailing Nokia, Samsung, LG Electronics Inc and Apple Inc.

It has so far shipped about 8 million of its flagship Blade handsets globally, with 5 million sold in China.

Almost all of ZTE's smartphones are powered by Google Inc's Android operating system, although the company is gradually introducing more Windows phones globally. It launched Windows smartphones in the United States in the second half of last year.

ZTE's Hong Kong-listed shares, which have risen 1.6 percent so far this year, finished up 2.1 percent on Tuesday, lagging the Hang Seng Index's 3.24 percent jump.

(Editing by Chris Lewis)

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