ZTE Seeking to Raise Profile of U.S. Brand Smartphones
ZTE is pushing to raise the U.S. brand profile with a goal of having the market be its largest for smartphones and tablets by 2015, ZTE North America President Lixin Cheng told us. While customers in China accounted for 35 percent of its cellphone sales in the first nine months of this year, that will change in the future as the company’s U.S. mobile device revenue grows 50 percent over the next three years, company officials have said. The U.S. currently represents about 10 percent of the company’s annual cellphone sales. ZTE secured its first distribution with a tier one supplier last year when Verizon launched the Salute smartphone.
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ZTE also has deepened ties with Cricket Communications and Sprint’s Boost prepaid service, the later having an exclusive on ZTE’s Warp smartphone through year-end, Cheng said. Boost introduced the prepaid Warp in early November at $249, but quickly cut the price to $199 for an Android 2.3-based smartphone featuring a 4.3-inch LCD, Qualcomm Snapdragon 1 GHz processor and five megapixel camera. Cricket launched the ZTE Score ($129) in September with a 3.5-inch LCD, 3.2 megapixel camera and Android 2.3, making it available through Best Buy with its optional Muve Music service. Bestbuy.com Wednesday was promoting the Score at $69, after $60 in “savings.” ZTE’s global shipments hit 19.1 million units in Q3, up 57 percent from a year earlier as it grabbed a 4.9 percent global marketshare, IDC said.
"Because the ZTE brand is new to the U.S., we have to get in touch with end consumers so they know who we are,” Cheng said. “We are making sure stores and sales reps are familiar with ZTE and through them we will become familiar to the consumer. We see that taking two to three years and that will be part of our brand enhancement phase."
Tier one cellular carriers like Verizon and Sprint were initially “more conservative” in adopting ZTE products, but tier two providers like MetroPCS have been “more open and from day one wanted the ZTE brand on it,” Cheng said. “They are helping us build the brand.” Sprint has carried ZTE’s Peel mobile hotspot ($79), but hasn’t added its cellphones. AT&T picked up ZTE’s Android 2.3-based Avail 3G smartphone in October, featuring a 3.5-inch display, five megapixel camera and 512 MB RAM. ZTE’s MF61 4G mobile hotspot is available through T-Mobile.
Despite the increasing emphasis on its own brand, ZTE won’t abandon a white label business in which it supplies carriers with cellphones bearing their name or a co-brand, Cheng said. “We have positioned ourselves as being a good OEM partner for the carriers,” Cheng said. “We listen to them and we define the product together and invest resources to support their product strategy."
ZTE opened a distribution center in Dallas, which also handles customer service and repairs. It also uses cellphone distributor Brightstar for access to big-box retailers like Best Buy and Walmart, Cheng said. While ZTE in Europe sought to appeal to a younger buyer in signing in October a tour sponsorship deal with EMI Music/Virgin Records for U.K. rapper Dr. Green, it doesn’t have similar plans for the U.S., Cheng said. And ZTE won’t rule out bringing product assembly to the U.S. as it expands its offerings to include a tablet PC that’s expected to debut in Q1. “If there is anything we can gain from an efficiency and economic point of view” by bringing production to the U.S. “we may also have some production here,” Cheng said. “We aren’t at that stage yet, but we are looking at the possibility."
In addition to supporting Android phones, ZTE also is backing the Windows Phone 7 platform, although it has yet to ship product in the U.S. ZTE’s Windows-based Spirit smartphone launched with European cellular carrier Orange earlier this year, featuring Microsoft Windows 7.5 operating system, 1 GHz Qualcomm Snapdragon processor, 512 MB RAM, 4.3-inch LCD with 480 x 800 resolution, 4.9-megapixel camera and 1,400-milliampere lithium ion battery. Adding the Windows Mobile 7 operating system-based smartphones in the U.S. market “will keep the industry healthy if there is more than one dominant operating system,” Cheng said. But ZTE has yet to land an agreement with a U.S. carrier for a Windows phone, he said.
"The user experience side of Windows phone is very good and the user interface is well polished with its emphasis on social media,” he said. “The whole issue is the eco system needs to be further developed, but the system in some cases is more polished than Android.”