ZTE have been one of the more successful Chinese smartphone manufacturers in the North American market thanks to a few factors, which include the business negotiating to sell their smartphones with carriers and owning sufficient patents in order to protect their devices. That ZTE has been able to sell devices outside of China has proven to be very good news, as domestic (Chinese) competition is very intense at the moment with the larger manufacturers of Xiaomi and Huawei battling it out between them with aggressive, cut-throat price cuts. ZTE has traditionally offered mid-range devices, which have slimmer margins compared with the high end devices and it’s at this part of the market where price cuts can severely hurt a business. ZTE’s strategy of concentrating on their international markets has helped shore up sales growth, where for 2014 it reported sales growth of over 50%, more than twice the overall industry growth of 20%. We are now seeing details emerge about Huawei’s first half of 2015 sales figures.
By way of background, Xiaomi has reported that it sold almost 35 million smartphones in the first half of 2015. Huawei reported sales of 50 million and now ZTE has announced that it has shifted 26 million smartphones plus another 20 million tablets and smart home products. Of the 26 million smartphones, almost 40% were high end, higher margin devices and as defined by ZTE’s benchmark of a price exceeding $250. This is good for ZTE’s profit margins. ZTE had originally aimed to sell 80 million smartphones in 2015 but has since reduced its expectations to 60 million, so it has fallen short at the halfway point but sales are traditionally stronger in the fall compared with the spring, driven by manufacturers releasing new devices. We are expecting a number of Chinese flagship models to be released in the coming months such as the Xiaomi Mi5, Meizu MX5 Pro and Huawei Mate 8. ZTE’s reported North American sales growth of over 40% year on year is very encouraging and will underpin the business going forwards. Nevertheless, competition will remain strong for ZTE as it copes with larger Chinese cousins in the domestic market. ZTE clearly has its work cut out.