ZTE eyes U.S. handset market as part of worldwide growth strategy

SHANGHAI--ZTE remains undaunted by its larger global handset competitors, and a key executive said the Chinese handset and equipment vendor continues to believe it can become one of the world's top three handset manufacturers by 2014. 

Liu Lin, ZTE's global director of handset marketing, shows off the company’s products.In an interview at the company's research and development center here, Liu Lin, ZTE's global director of handset marketing, said ZTE will be able to catapult itself ahead of larger rivals such as Sony Ericsson and Research In Motion (NASDAQ:RIMM) because of its ability to customize its products for different operators, as well as its strength in the Chinese market.

According to research firm ABI, in fourth quarter 2009 ZTE was the world's seventh largest branded handset manufacturer, just behind RIM and just ahead of Apple, thanks to year-over-year handset shipment growth of close to 40 percent.

ZTE shipped 60 million wireless terminals, including 40 million handsets, in 2009, and aims for 30 percent growth this year, according to Liu. The firm's handset division currently accounts for around 26 percent of the company's total revenue, but Liu said that in the coming years the company expects that number to rise to 50 percent.

Liu said that for ZTE, China, Europe and North America are key handset markets, but he said that for smartphones, ZTE is focused right now on only the Chinese and European markets. He said the company will continue to grow its market share in China because it supplies 3G handsets for three main Chinese operators, which all use different CDMA standards. As China Mobile, China Unicom and China Telecom continue their 3G expansions this year, ZTE will be able to leverage that growth, he said.

ZTE faces a difficult task in shaking up the established order among the world's top handset makers though. In the first quarter, RIM assumed the No. 4 spot, according to research firm IDC, pushing Sony Ericsson down to No. 5 and squeezing out Motorola from the top five altogether. Indeed, when RIM muscled its way into the elite ranks of handset makers, it was the first time a company had fallen from the top five since the second quarter of 2005, when Sony Ericsson grabbed the No. 5 spot from BenQ Siemens.

Nonetheless, Liu said ZTE's experience in wireless equipment will give it an edge among its competitors. "We can understand the requirements from operators, and we can provide better products for customization," he said. Liu said the company's handset engineers collaborate closely with its infrastructure designers, a system he termed "Project Management Operation." He also said ZTE will look to introduce new ranges of low-cost smartphones.

The company currently has several smartphones running Google's Android platform available in France, but Liu played coy about when the company will release a smartphone for the U.S. market. He said ZTE is currently holding discussions with all four of the Tier 1 U.S. operators, and plans to release multiple models before the end of the year.

Interestingly, Liu said the company also plans to eventually supply LTE data cards to the U.S. market. He declined to discuss when or with what carriers, but noted that the company is talking with both Tier 1 and Tier 2 U.S. carriers. Both Verizon Wireless (NYSE:VZ) and MetroPCS (NASDAQ:PCS) plan on launching LTE service later this year.

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Correction, May 25, 2010: Due to a reporting error, this article originally stated that ZTE shipped 68 million handsets in 2009.The company shipped 60 million wireless terminals, including 40 million handsets.