With new Verizon partnership, ZTE hopes to pass LG within 12 months in U.S. smartphone market

The Cymbal for Verizon represents a foot in the door for ZTE at the nation's largest wireless carrier. (ZTE)

SAN FRANCISCO—Smartphone vendor ZTE said it continues to see momentum in the U.S. smartphone market, and is hoping to pass LG to become the nation’s third-largest vendor within the next 12 months. However, that’s not ZTE’s entire strategic plan, according to the company’s Jeff Yee.

Yee, ZTE’s VP of technology planning and partnerships, said that ZTE too is looking to expand into related electronics industries like wearables and, notably, the internet of things. He said the company’s SyncUp Drive hotspot for cars, for T-Mobile, is a prime example of the kinds of devices ZTE hopes to expand into in the coming months.

“That’s the poster child for our IoT products,” Yee said, adding that the company has enjoyed substantial sales of its SyncUp Drive offering. T-Mobile late last year announced a teaming with ZTE and the connected car startup Mojio to launch a connected car offering that doubles as a traveling Wi-Fi hotspot. The carrier’s SyncUp Drive plugs into a car’s ODB-II (on-board diagnostics) port to analyze driving behavior, provide maintenance reminders, track location and monitor other connected vehicles; it sells for $150.

Indeed, Yee said that ZTE is currently building IoT modules and selling them to other devicemakers as a way of expanding its sales in the space. The company is challenging IoT module vendors like Sierra Wireless in the attempt.

But it’s still smartphones that command most of ZTE’s focus. The company is the nation’s fourth-largest smartphone vendor with 11.5% of the U.S. market, according to Counterpoint’s figures for the second quarter. LG is the third-largest smartphone player in the market with 15.4% of the market, behind market leaders Samsung and Apple.

Here on the sidelines of the Mobile World Congress Americas trade show, Yee said ZTE has enjoyed significant momentum recently with a new deal with Verizon; ZTE is now selling its low-end Cymbal LTE flip phone through Verizon’s prepaid channels. Although the Cymbal doesn’t enjoy anywhere the prestige of an iPhone or a Galaxy phone, it represents a foot in the door for ZTE with the nation’s largest wireless carrier, and could result in expanded distribution for ZTE at Verizon.

Overall, ZTE doesn’t play at the high end of the smartphone market in the United States (it does sell its high-end Axon line of phones unlocked online in the U.S. market). Instead, ZTE has built its business in the low-end, prepaid U.S. business, accruing sales through the likes of MetroPCS, TracFone and AT&T’s Cricket brand.

“Chinese vendor ZTE led the way growing 36% with successful prepaid sales within three major carriers and particularly strong growth within national retail channels,” Counterpoint Research Director Jeff Fieldhack said in a release from the research firm on the U.S. smartphone market in the second quarter. “ZTE is the number one brand in the channels with 21% share outside of the top four carriers. This growth can be attributed to a broader portfolio from ZTE catering to most of the consumer segments within the fast growing low to mid-tier prepaid markets. The company offers competitive specs, low price points and variants designed for operators. The range and price points of popular models is broad. The company had a successful quarter selling the ZTE Cymbal flip feature phone as well as the 6” inch phablet ZTE Max XL. It’s surprising to see a Chinese company charting growth whereas other successful Chinese brands such as Huawei, OPPO, vivo, and Xiaomi either have struggled in the US or have not attempted to enter.”

“Our growth opportunities include expanding out of prepaid,” agreed ZTE’s Yee. He added that the nation’s move to 5G network technology could also represent an opportunity for ZTE and other, smaller handset players to make a play for the higher end of the market.