Despite restrictions, ZTE continues to grow

• Chinese vendors have pariah status in many markets
• Huawei and ZTE have a smaller global addressable market due to trade restrictions and sanctions
• But they are not going away
• ZTE grew its business in 2021, and not just in China

In the face of trade restrictions and being branded as a security threat by the globally influential US authorities, Chinese network equipment and device maker ZTE not only refuses to give up and go away, it continues to grow. And that’s going to be an irritation for those who fear China’s influence in the global communications sector, as well as for its rivals.

ZTE has just announced full year revenues for 2021 of RMB 114.5 billion (US$18.1 billion), a 12.9% year-on-year increase, despite the pressures of doing business during the ongoing Covid-19 pandemic and what the vendor describes as a “complex external environment,” which is a somewhat oblique way of referencing the shackles imposed mainly (but not only) by the US authorities – ZTE is on the US Entity List of companies deemed to be a security risk, which means it cannot buy or use US-made technology unless granted a special license.

Currently, ZTE can be grateful that China’s network operators are pumping so much capex into their 5G and fixed line networks, providing it almost guaranteed business: In 2021, its revenues from customers in China hit RMB 78.1 billion ($12.4 billion), up by 14.7% and accounting for almost 69% of its total sales.

But while it’s true that the majority of ZTE’s business comes from its home market of (as is also the case for its larger peer and rival Huawei), its international sales are also growing. Revenues from international markets totalled RMB 36.5 billion ($5.8 billion), up by 9.1%.

The vendor’s network infrastructure business lines (aka ‘operator networks’) generated revenues of RMB 75.7 billion ($12 billion), up 2.3%, so limited growth for that part of the business. 

But it’s still a significant player in the overall mobile network infrastructure market, albeit some way behind the top trio of Ericsson, Nokia and Huawei: According to Mobile Experts, ZTE commanded a 14.5% market share of the circa $45 billion global radio access network (RAN) market in 2021. (See What’s up with... RAN market shares, Vodafone UK, Bharti Airtel.)

But the vendor’s consumer line of devices (mobile phones and home devices) ramped its sales by 59.2% to RMB 25.7 billion ($4 billion), with the home devices line increasing year-on-year sales by 80% and mobile devices by 40%.

Sales to enterprises and government customers came in at RMB 13.1 billion ($2.1 billion), up 16% year-on-year. 

Huawei has taken the brunt of the global squeeze on Chinese vendors. It is yet to publish its annual report, but earlier in the year it announced that its full year 2021 revenues were expected to be around RMB 634 billion ($100 billion), down by about 30% year-on-year. But it’s still the biggest vendor in the global network infrastructure market, according to Dell’Oro, and while its market share is shrinking it still commands more than a quarter of the entire sector.

- Ray Le Maistre, Editorial Director, TelecomTV