China’s ZTE, the world’s number 4th handset maker and the one which launched its first basic mobile phone in Africa little more than 10 years said that it would sell more than 30 million smartphones in 2012. The company has already expanded its footprint in emerging markets and Europe although it said last month that it was scaling back operations in Iran. ZTE plans to focus on its Blade and Skate handphone models, upgrading them rather than unveiling new models, and expects to also double its tablet PC sales this year, said executive director He Shiyou on Monday.
“As handsets contribute more to overall revenue, it will affect our profit margins. In 2012, our aim is to increase handset margins,” He told reporters on the sidelines of the company’s annual analyst conference in Shenzhen, where the company is based. “We spoke to components suppliers recently and it seems that handset makers such as ZTE won’t be able to reduce their raw material costs,” said Nomura Securities analyst Huang Leping. “For ZTE to improve its profit margins, they will have to raise their average selling prices and to do so will largely depend on their sales in the North American and Japanese markets.”
“The (higher) value part of the market is driven by brand and that’s the part a company like ZTE needs to focus on,” said Adam Leach, a London-based analyst at Ovum, noting that margins are much higher at the top-end of the market. “People who buy Apple and Samsung have greater brand awareness so they might not take chances with a little-known brand, especially one from China,” said Teck-Zhung Wong, a Beijing-based analyst for research firm IDC. “No one really knows ZTE outside China.”