Dialogue with Wang Xiang, Chief Strategy Officer of ZTE

ZTE held its first strategic communication meeting in 2022 recently. Wang Xiang, senior vice president and chief strategy officer of ZTE, said in an interview with Sina Technology and other media that through the recovery and development from 2018 to 2021, the company has basically completed the expected goals in the strategic recovery period and strategic development period. According to the previously formulated strategy, in 2022, ZTE will enter a period of strategic transcendence. 

We expect to quickly enter the Fortune 500 in the next 2-3 years. In terms of the entire product structure or income structure, the first curve will be solidified, and the stable business growth rate of more than 10% per year will be maintained to further expand the market position. At the same time, accelerate the expansion of the second curve, so that the compound growth rate can reach more than 40%, and the revenue structure of a new business can be increased from the current 10% to more than 30% in the next few years.

Hope the second curve compound growth rate is more than 40%

2021 is the final year of ZTE's strategic development period. On January 28, ZTE released the 2021 annual performance forecast. ZTE's gross profit margin has recovered and improved year on year, and its profitability and profitability have improved. The performance forecast shows that it is expected to achieve a net profit of 6.5 billion to 7.2 billion yuan attributable to ordinary shareholders of listed companies in 2021, a year-on-year increase of 52.6% to 69.0%, and net profit attributable to ordinary shareholders of listed companies after deducting non-recurring gains and losses 3.0 billion to 3.5 billion yuan, an increase of 189.7% to 238.0% year-on-year, both hitting record highs.

"Starting in 2018, we set a plan with an eight-year cycle. After the two-year recovery period in 2018 and 2019, and the market development from 2020 to 2021, our compound growth rate during the development period has basically reached 15. %, achieved the original expected goal, the overall market structure has also been changed, and our enterprise has become healthier." Wang Xiang said.

According to Wang Xiang, ZTE's first and second curves are divided according to product dimensions. The CT business represented by wireless, wired and other products is the first curve, while the growth and emerging businesses represented by IT, digital energy, and terminals Business is the second curve. This not only conforms to the development trend of the industry and the market, but also better supports and meets the business transformation and upgrading needs of operators and government and enterprise customers, as well as the increasingly personalized and diversified needs of individual consumers.

For the development strategy of the first and second growth curves, ZTE currently adopts the strategy of steady growth in the first curve and accelerated development in the second curve. In terms of resource investment, ZTE will continue to maintain its investment in the first curve to achieve leadership in core technologies and increase its share in the value market. Promote the rapid incubation and growth of new businesses.

"We hope that the compound annual growth rate of the second curve can reach more than 40%, and the income structure of new businesses can be increased from a little more than 10% now to more than 30% in the next five years." Wang Xiang said.

IT and digital energy form a "special team"

In the field of IT, Wang Xiang sees that, as a field that is developing very fast at present and even in the future, the attractiveness of the entire market of the IT industry is very strong. At the same time, as the IT industry continues to penetrate into all walks of life, these segmented markets are also requiring more integration of software, hardware, and underlying chips. On the other hand, based on the product technology and other capabilities that ZTE has accumulated in the CT industry, ZTE can quickly establish contact with the IT field and achieve rapid development.

Wang Xiang believes that the IT industry and the CT industry are actually a trend of integration, and can even be called DICT or ODICT, which essentially revolves around communication, information, data, and operations. Therefore, IT is actually an extension of CT business, and it is a must for ZTE.

In the process of expanding from CT to IT, in order to accelerate the expansion of the application of 5G industry, ZTE has continued to focus on key industries to carry out business layout. Wang Xiang saw that in the process of focusing, many emerging problems, in the company's ecology or the entire industrial chain, actually have ready-made solutions, but due to the isolation of different industrial chain links and organizations, resulting in Difficulties in composing solutions for different technologies. To this end, ZTE has established a "special team" led by the company's Executive Vice President (EVP) to tackle tough problems and accelerated the expansion of new businesses by strengthening and improving administrative and organizational coordination capabilities. At present, two industries of mining and metallurgical steel are being promoted. In addition, in order to expand the software and hardware advantages of ICT technology to the field of automotive electronics, ZTE has also established an automotive electronics product line to help the development of intelligence, networking, and electrification in the automotive field. In the field of digital energy, at the beginning of 2022, ZTE also established a digital energy operation department to officially enter the new energy market.

Terminal business recovers and moves towards mainstream manufacturers

At present, ZTE's terminal business mainly serves two customer groups: individual consumers and household consumers. In the first three quarters of 2021, ZTE's mobile phone and home information terminal revenue maintained rapid year-on-year growth, of which mobile phone revenue increased by about 40% year-on-year, and home information terminal revenue increased by about 90% year-on-year.

According to Wang Xiang, in the past two years, ZTE's terminal business has been undergoing structural adjustment. From the original more than 70% of the revenue from overseas markets such as North America, it has become both overseas and domestic; from the original operator field, it began to transform to the consumer field. Through about two years of structural adjustment, the terminal business has also achieved a very big improvement in the past two years. In 2021, ZTE's terminal shipments will exceed 100 million units. Annual shipments increased by 60% year-on-year, of which domestic sales increased by 150% year-on-year and overseas by 50% year-on-year.

"Based on such a growth, we will focus on mobile terminals as an entry point in the future to expand our home field and industry field, and make a corresponding layout around IoT." Wang Xiang said. Wang Xiang saw that in the home terminal market, with the innovation of home network connection technology, the current Wi-Fi 6 is gradually transitioning to Wi-Fi 7. With the continuous increase in speed requirements, frequency and coverage are further balanced. And with trade-offs, the network structure of the family will be constantly adjusted, which will also bring more opportunities. In addition, the access of more and more smart devices in the home will also bring new services such as a home intranet and cloud access. The changes in these trends will promote the development of the company's home terminal business. "Our home terminal products have shipped more than 580 million units worldwide, and we have the foundation of hundreds of millions of home connections. It is our advantage to use such a foundation to further extend to the home." Wang Xiang said.

In the field of personal terminal business, according to Wang Xiang, ZTE has begun to deploy its own offline sales channels and online brand launch in first-tier cities in China. "With the advancement of channel construction, after two years, we will try to attack the leading manufacturers. In the future, ZTE will continue to expand peripheral products around personal and family terminals, and build a '1+2+N' strategy Ecology, promoting the transformation and evolution of 'hardware-software-service-ecology', and form a full-scenario smart ecosystem."

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