The clear leader in TD-SCDMA devices in its home market, ZTE's ambition abroad is to be every operator's best friend, leveraging its huge technical resources and scale to drive high-end functionality right across the handset spectrum. Having cracked the market for operator own-branded handsets at the lower end of the range, ZTE's impact on the market for high-end, open-platform devices will be fascinating to watch.

ZTE's status quo - whatever you want, whatever you like
Ovum recently spoke with ZTE's handset management about the Chinese telecoms equipment provider's burgeoning cellular devices business, both in its home market and elsewhere.

ZTE's growth in the handset markets has been rapid. From 15 million units shipped in calendar-year 2006, the company is on course to ship 50 million in 2008 - over 100 million since it started the business in 1998 - making it the clear global number six handset provider by volume. That's no mean feat for a Chinese handset manufacturer which was virtually unknown outside its home market two years ago.

More than 80% of these are co-branded with and customised for its operator partners, including major scalps such as Vodafone, Telstra and Reliance, as well as China Mobile, China Telecom and China Unicom at home. ZTE perceives its flexibility in meeting operator customisation requirements on a huge scale as a key to this success.

In its home market, ZTE is a frontrunner in 3G devices and a clear leader in TD-SCDMA, owning more than 30% of the total market. For the most part, though, ZTE's impact on the handset market outside China has tended to focus on low-end and mid-range handsets, where it is doing very good business in both emerging and mature markets.

To date, its overseas 3G activities have focused on the buoyant market for USB modems for laptop PCs. ZTE is very proud of this business, which it has said is now on track to ship over 6 million such devices by the end of 2008 and which it expects to expand to around 20 million by the end of 2010, despite the rapid emergence of embedded 3G modems.

Opening a new window on Microsoft handsets
But being a volume supplier of low-end and mid-range handsets was never going to be enough for ZTE. With operator and public interest increasingly directed towards high-end, Internet-capable devices, it was only a matter of time until ZTE looked to boost its profile through targeting that market.

That breakthrough now looks to have happened. ZTE will begin shipping Windows-Mobile-powered devices with Vodafone next year and there are signs of other such deals. Indications are that these will seriously undercut similar devices from other manufacturers, as a result of ZTE's scale.

HTC is ZTE's main competitor in this segment, although it cannot really be considered a rival in overall scale. While other OEMs have adopted Windows Mobile, they have either lacked the scale to truly build momentum for the platform, even if adopted by operators (e.g. E-ten, Inventec), or have lacked the commitment to drive the platform deep into their portfolios (e.g. Samsung, Motorola). ZTE could potentially do both.

Whether it will or not remains to be seen. ZTE's desire to please operators is something of a double-edged sword in terms of the depth of commitment it can bring to Windows Mobile.

Is Linux a diversion even if operators demand it?
Instead of committing fully to Microsoft technology for its open-platform devices, ZTE confirmed that it also plans to support Linux to meet operator demand for such handsets. Which variant or variants ZTE plans to support is as yet unclear. What is clear, however, is that ZTE is putting considerable resources behind its Linux project.

The same cannot be said for Symbian. While ZTE said it was interested in Symbian - especially in terms of its competitive cost to manufacturers relative to Windows Mobile or Linux - it has not yet put any serious R&D effort behind the OS, citing Nokia's near monopoly of the Symbian handset market (outside of Japan, at least).

Interestingly, Symbian's trajectory towards open source does not by itself appear to be enough to cajole ZTE to alter its stance. We're guessing that operator demand could change this, although such a project would take at least two years to bear fruit.

Source:ovum