ZTE Corporation (0763.HK / 000063.SZ), a major international provider of telecommunications, enterprise and consumer technology solutions for the mobile internet, today has posted its financial results for the first half of 2021.
According to the results, for the six months ended 30 June 2021, ZTE, confronted with the opportunities and challenges from the internal and external environment, achieved operating revenue of RMB 53.07 billion, 12.4% higher than a year earlier. During the period, net profit attributable to holders of ordinary shares of the listed company reached RMB 4.08 billion, an increase of 119.6%, and net profit after extraordinary items attributable to holders of ordinary shares of the listed company amounted to RMB 2.11billion, representing a year-on-year increase of 134.2%. Basic earnings per share was RMB 0.88.
The growth benefits from the company’s initiatives of focusing on high-quality growth and technological innovations while insisting on the leadership in technological competitiveness and actively promoting its business development.
Achieving double-digit growth in its domestic and international revenue and continuous improvement in profitability
In the first half of 2021, ZTE’s operating revenue in both domestic and international markets achieved a double-digit year-on-year growth. In domestic market, the company, leveraging the development opportunities of 5G and new infrastructure, made great achievements in market share, and empowered the digital transformation of industries.
The operating revenue in domestic market was RMB 35.95 billion, a year-on-year increase of 13.2%, accounting for 67.7% of the total operating revenue. In international market, the company overcame the difficulties brought by pandemic.
By virtue of its ICT technologies, employee localization and efficient coordination of industrial chain, the company’s operating revenue in international market rose 10.8% to RMB 17.12 billion, covering 32.3% of the total operating revenue.
ZTE has been intensively committed to developing carriers’ networks to further optimize its market share while actively expanding government and corporate business, and consumer services as well.
For the first half of 2021, the operating revenue from the carriers’ networks amounted to RMB 35.05 billion, thanks to the market share growth of its high-value products. The revenue of its government and corporate business increased by 17.7% to RMB 5.67 billion, with sever and storage products services doubling on a year-on-year basis in domestic market. In consumer services, ZTE harvested revenue of RMB 12.35 billion, a year-on-year increase of 66.6%, with revenue of its residential terminal services and mobile devices services rising over 90% and 40% respectively.
ZTE has been committed to optimizing its cost structure continuously. In the first half of 2021, ZTE’s gross profit margin rose by 2.7 percentage points on a year-on-year basis to 36.1%.
Attaching great importance to operation quality, in H1 2021, ZTE continued to control operating risks and sped up asset turnover while strengthening asset risk management and reducing asset impairment losses. In the period, the total of credit impairment loss and asset impairment loss of the company fell to RMB 80 million. ZTE also insisted on “cash flow first”. The company’s net cash flow from operating activities for H1 2021 jumped to RMB 7.03 billion, hitting a record high with a year-on-year increase of 244.4%.
ZTE, committed to building stronger core competitiveness, has been continuously enhancing its investment in its core technologies, including chipsets, algorithms and network construction. In the first half of 2021, the company’s R&D spending amounted to RMB 8.86 billion, which was 16.7% as a percentage of operating revenue.
To date, ZTE has filed over 80,000 global patent applications, and accumulated more than 40,000 granted patents globally, including 4,400 chip patent applications and about 1,950 granted patents. Besides, ZTE has accumulatively won nine gold awards, two silver awards, and 36 excellence awards among the China Patent Awards and 22 awards among the Guangdong Patent Awards, making it the most awarded company in the telecommunications industry.
According to the latest report from Jones Lang LaSalle (JLL) in April, ZTE’s patented technology value has exceeded RMB 45 billion. In 2021, with ZTE’s allowed intellectual properties services developing rapidly, ZTE’s intellectual properties income has grown steadily, which has brought cash benefits to the company and will continue to create predictable benefits. It is estimated that our intellectual properties will bring nearly RMB 4.5-6 billion revenue to the company during the period from 2021 to 2025.
Consolidating digital foundation to prep for opportunities of digital economy
ZTE has been always focusing on “creating value for customers”, and continuously enhancing its core competitiveness. The company, as the driver of the digital economy, is committed to commercial networks, computing power infrastructure and terminal products with ultimate experiences, ultimate performance and efficient energy consumption.
In terms of carriers’ networks, ZTE has proactively participated in the global 5G constructions, helping operators build integrated basic networks with excellent performance and efficiency for sustainable development. According to reports from external research organizations, ZTE ranked No. 2 for both the 1H21 global 5G NR revenues and the 1H21 global 5G Core Network revenues, and the company also ranked No. 2 for the 1Q21 global operator market share of optical network. In addition, the company’s ZXONE 9700 series is recognized as a leader in the metro packet-optical transport market and TITAN solution a leader in the global GPON (and overall fiber access) market.
For wireless products, ZTE has released the industry’s first Intelligent Orchestration Radio Network Solution and conducted the industry’s first commercial trial in Dalian, China. Besides, ZTE’s server and storage products have been selected by operators for group procurement for many consecutive years. The company acquired the largest share of PC server centralized procurement of China Mobile in 2019-2021. Currently, those products have been applied in over 40 countries and regions around the world.
For wired products, the company’s full series of 5G transport end-to-end products have been deployed on a large scale. As of the first half of the year, a total of 110,000 units have been delivered and over 400 5G transport networks have been deployed. In core routers, ZTE has made great progress in the past six years, winning the bids for China Telecom’s CN2 backbone network project, China Mobile’s high-end router and high-end switch product group procurement project, and China Mobile’s cloud resource pool project. ZTE’s service routers have been ranked the second in terms of market share of centralized procurement in China.
In terms of optical transmission, ZTE ranked the second in the domestic market share of 200G+ optical transmission. For fixed network access, the share of ZTE’s newly-added 10G PON OLT market in China exceeds 40%. The company has completed more than 20 trial and commercial networks of the Home Optical LAN in China. Its video system boasts more than 200 million users, with a continuous increase of market share. In the field of communication and energy, ZTE’s full range of 5G power supply products and solutions have safeguarded power supply for more than 300,000 5G sites worldwide.
In terms of government and corporate business, ZTE has achieved significant growth with a focus on major industries like energy, transportation, government affairs, finance and the Internet. Relying on its Precision Cloud Networks and Empowerment Platforms, ZTE has been committed to new infrastructure deployments, 5G industrial applications, and digital transformation upgrade. Meanwhile, the company’s core products and solutions including transmission products, data centers, servers and storage products, enterprise networks, cloud workspace solution, distributed databases and more have been widely deployed in the field of government and corporate business, and developed into a good cloud and network ecosystem. Moreover, ZTE’s servers and storage products have been utilized in some leading enterprises in various industries including finance, internet, energy and beyond.
As a leading mature financial-class distributed database, ZTE’s GoldenDB has been deployed commercially in the core systems of large commercial banks for over three years. GoldenDB’s use cases cover all banking services of various banks including large state-owned banks, joint-stock commercial banks, rural credit cooperatives, as well as urban and rural commercial banks. GoldenDB is among the first batch that have passed the verification test of distributed database standard compliance with excellent results. With the optimal performance, it supports million-level concurrent connections. ZTE’s fully modular data center solution has been put into commercial use on a large scale, with over 300 project cases worldwide. Also, its cloud workspace solution has facilitated the digital transformation of enterprises by protecting the security of information assets and improving the quality and efficiency of the enterprises. As the industry application benchmarking project, ZTE’s practice of “Intelligent Manufacturing Powered by 5G” at the Nanjing Binjiang Smart Manufacturing Base, was recognized as the excellent ICT case of China 2020.
In the consumer business, ZTE has been making breakthroughs in branding, products, and channels, with its year-on-year revenue growth at a rapid pace.
ZTE continues to build an image of its mobile phone as high-tech, high-quality, and youthful brand, and has released its annual flagship smartphone ZTE Axon 30 5G Series. ZTE has once again led the first commercial launch of the new-generation under-display camera smartphone ZTE Axon 30 in the world. Furthermore, the ZTE Axon 30 Ultra adopts ZTE’s original Trinity triple main camera with quad array imaging system, opening up the third era of mobile imaging. ZTE’s 5G mobile broadband (MBB) products have cumulatively been sold in more than 30 countries and regions.
In addition to the rebound in its mobile phone business, ZTE still maintains its global leading position in the industry as its home information terminals and innovative integrated terminals businesses have been growing. The home information terminal business has achieved a leap-forward growth, with a cumulative shipment of over 540 million units. Besides, ZTE has achieved large-scale commercial deployments of its Wi-Fi 6 products in high-end markets like Japan, Italy and Spain.
ZTE has seized the opportunities of 5G application innovation and development. The company will further enhance its internal digital transformation, and create an all-cloud, intelligent, and lightweight “Ultimate Cloud Company” in the fields of R&D, operation, office, and production. To date, ZTE already has mature products and solutions for network infrastructure, cloud components, and the enterprise-level application iCenter based on its own digital transformation.
In terms of industry digitization, ZTE has extensively implemented the “5G+” innovation practices in 15 industries, such as electronics manufacturing, steel, metallurgy, mining, power, rail transit, ports, new media, cultural tourism and so on. Besides, ZTE has been iteratively leveraging these industries’ capabilities in its “5G+” applications, expecting to make further incubation in application innovations and empower the constructions of the digital ecosystem for thousands of industries.
In automotive electronics, in the first half of 2021, ZTE, leveraging its core technology advantages in the ICT field, has become a basic vehicle services provider and high-performance partner with independent innovation capabilities. Currently, the company has reached strategic cooperation with several car companies, including FAW-Volkswagen Automotive Co., Ltd. and SAIC-Volkswagen Automotive Co., Ltd..
Meanwhile, ZTE actively implements the “carbon neutrality” and “carbon emission peak” strategies to assist its operators in building end-to-end green and low-carbon networks, empowering vertical industries to save energy and reduce carbon emissions.
Moving forward, ZTE, while solidifying its position with innovative initiatives, will be committed to becoming a driver of the digital economy. The company will push ahead with its research and innovation in core technologies and basic science, and spare no efforts to overcome the hardest challenges to improve its core competitiveness. In addition, the company will actively empower the digital transformation and intelligent upgrade of the society, with an aim of achieving high-quality growth. Also, the company will continue to attract and motivate core talents, improve its compliance management system, and strengthen its internal control and management.
With the future being just around the corner, ZTE is poised to work with industrial and ecological partners to build stronger core competence, aiming to achieve high-quality growth together.