All is not well with the march of China’s ZTE in its grail to achieve a move from fourth to a podium place as global handset producer. Currently the fifth-largest manufacturer handset and fifth in the telecoms equipment league, ZTE has just posted its third consecutive fall in quarterly profit. This is due to less than sparkling telecoms spending and downward drifts in foreign exchange rates. The latest exchange rate of the US$/Chinese Yuan at the time of going to press was $1 = Y6.3070.
As well as its local Shenzen neighbour, Huawei, ZTE has moved into consumer electronics to keep pace with the burgeoning convergent market as the telecoms spend has slowed. Both vendors are now offering devices such as smartphones and tablet PCs.
Back in Q4 2011, ZTE's net profit slithered to Y991mn (US$157mn), down 48% percent from Y1.89bn a year earlier. This was seriously under the Y2.16bn prediction.
Adding to the woes, Nokia's push in China will be an important test for the Windows Phone, which has so far had limited success in Europe and the United States. The world's largest mobile maker by volume is reliant on Windows after dumping its own software platforms last year.
Nokia Chief Executive Stephen Elop introduced two models based on the Lumia 610 and Lumia 800 smartphones. The Lumia 800C will be sold without a carrier contract for Y3,599 (US$573) from April. Pricing for the cheaper 610C model, to launch in China in the second quarter, will be announced later.
Both models will use the CDMA technology of China Telecom, the nation's third-largest carrier. Nokia plans to bring all four Windows Phone models to the Chinese market in the second quarter and also adopt China Unicom's wireless technology. Shares in Nokia rose 3% to €4.116 after an upward shift in its Swedbank rating. From 2010 to 2011, Nokia saw its share of the Chinese market shrinking to 30% percent from 70%.
Both ZTE and Huawei are expected to benefit after investing around Y350bn (US$53bn) this year upgrading and expanding their 3G technology, as together they own half the core infrastructure telecoms equipment market in China.
ZTE sells equipment in more than 140 countries and derives around half its sales overseas, making its yuan-denominated earnings vulnerable to the weakening of the euro and other currencies such as the Brazilian real.
It will take more than an army of Terracotta Warriors to halt the slide.