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China telecoms take on the world

China is positioning the home-grown telecoms giant ZTE, which expects to sell 50 million phones this year, to take on global market leaders such as Apple, Samsung and Nokia.

China is positioning the home-grown telecoms giant ZTE to take on global market leaders such as Apple, Samsung and Nokia.

ZTE expects to sell 50 million smartphones this year and is now starting to aggressively target countries outside China.

"Chinese telecoms equipment manufacturer ZTE has tremendous national support from a country anxious to see China create a smartphone brand of its own," said Adam Leach, an analyst at the research firm Ovum.

Although its reputation at the moment is mainly built on making extremely low-cost handsets, ZTE aims to build a strong international consumer brand.

"ZTE, along with Huawei, are the vendors to watch this year," said Tim Shepherd, a senior analyst at the research firm Canalys. "Both have ambitions and aspirations to follow the HTC model and build their brands and reputations internationally."

ZTE is moving away from the low end of the market with a new generation of smartphones such as the Mimosa X, which is powered by Google's Android software.

"[ZTE] has addressed product quality issues and concerns and produces decent quality devices today," Mr Shepherd said. "Products like the Mimosa X are competitive with devices from much better known brands."

But many US customers may prefer to avoid buying foreign brands. North America is famous for its "not invented here" prejudice when it comes to buying non-US brands, despite the fact that products such as the popular Apple iPhone are largely assembled outside the United States in locations such as China.

According to Rob Enderle, the principal analyst at Enderle Group, ZTE needs to acquire more western know-how before it can take on the global giants.

"Chinese companies have had trouble breaking out of China - Lenovo did it, but only after acquiring IBM's PC Company to get a global skill set," said Mr Enderle.

"Without such an acquisition and influx of global knowledge, it is very doubtful ZTE can be successful outside of China near term."

But the main hurdle facing ZTE is that of international branding. Even when it has handsets that are equal to those of the market leaders, the company will have to convince consumers in regions such the US, Europe and the Middle East.

"ZTE will no doubt wish to move up through the pricing tiers and compete in different segments in the market beyond just the ultra-low-end," said Mr Shepherd

"However, it will need to engage in significantly marketing and brand building activities," he added.

But analysts believe ZTE and Huawei are well-positioned to take advantage of the expanding global smartphone market.

"At the moment ZTE and Huawei are lowering prices and that is generally a good place to be in the market. It is, for example, how HTC started," said Mr Leach.

Even today's market leader, Apple, is a relative newcomer to the mobile phone market. Ten years ago, Nokia phones from Finland were leading the mobile phone fashion stakes and Apple had yet to unveil an iPhone.

There is no reason to suppose that Apple will inevitably continue to dominate the market indefinitely or that there is no room for further competition.

But it is debatable whether a relative newcomer coming in at a low price could stand a chance of seizing Apple's high ground anytime soon.

business@thenational.ae

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