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ZTE sharpens focus on high-end smartphones to boost margins

Employees of ZTE chat on the roof of its headquarters in Shenzhen, Guangdong province, April 17, 2012. REUTERS/Tyrone Siu
Employees of ZTE chat on the roof of its headquarters in Shenzhen, Guangdong province, April 17, 2012. REUTERS/Tyrone Siu

By Lee Chyen Yee

HONG KONG (Reuters) - China's ZTE Corp, the world's fourth-biggest handset maker, plans to ship more high-end smartphones this year to help increase profit margins and revenue, a senior company executive said on Wednesday.

ZTE expects to ship more than 50 million smartphones in 2013, exceeding its earlier forecast, and sees smartphones making up 70 percent of overall consumer device sales this year, Lv Qianhao, head of ZTE's handset strategy, told Reuters in an interview on the sidelines of a company event.

ZTE has gained considerable market share in the mobile phone sector, but its margins have been pressured as it sold more affordable phones. These narrow margins, along with project delays in its telecom equipment business, prompted the company last week to flag a net loss of up to 2.9 billion yuan ($467 million) for 2012.

"We would like to raise the percentage of mid- to high-range smartphones. That's the direction we're heading," Lv said as he showed off the Grand S and Grand Era smartphones, and the Grand Memo phone-tablet hybrid, also referred to as a "phablet".

ZTE aims to increase its smartphone revenues by around 40 percent this year from last year, Lv said, in a bid to boost margins in the highly competitive sector that Samsung Electronics Co Ltd and Apple Inc dominate.

ZTE has also hired a new global chief design director, Hagen Fendler, a German who used to work at Huawei Technologies Co Ltd as its chief design director for handsets.

ZTE shipped 35 million smartphones last year, and smartphones made up 60 percent of its overall consumer device sales in 2012.

ZTE's tablet sales, however, missed its target due to competition from Apple and Samsung products, Lv said. ZTE shipped 560,000 tablet PCs last year, short of its goal of more than doubling sales to 1 million, he said, declining to give an estimate for this year.

All of ZTE's tablet PCs run Google Inc's Android operating system, but as part of product diversification, Lv said 10 percent of tablets shipped this year will run Windows, with 90 percent using Android.

In the smartphone sector, ZTE ranks fifth, trailing Samsung Electronics, Apple, Huawei and Sony Corp, according to technology research group IDC.

ZTE shares rose 1.1 percent to HK$14.72 on Wednesday, beating a 0.7 percent gain on the broader market. They lost nearly half of their value in 2012, compared with a 23 percent rise in the Hang Seng Index, but have rebounded 13 percent this year.

(Additional reporting by Alison Leung; Editing by Chris Gallagher)

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