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ZTE Chief Operating Officer Xie Junshi: Strengthening ZTE's resilience to achieve rapid growth

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SHENZHEN, China, Oct. 25, 2021 /CNW/ -- ZTE Corporation (0763.HK / 000063.SZ), a major international provider of telecommunications, enterprise and consumer technology solutions for the mobile internet, today announced that the company's Executive Vice President and Chief Operating Officer Xie Junshi has delivered a keynote speech entitled "Winning future with digital intelligence" at its Global Analyst Conference held online on October 25th, 2021. Mr. Xie's speech presents the company's landscape in the digital economy era, covering corporate positioning, development goal and strategic initiatives.

"Facing the next strategy period, ZTE will achieve leap-forward development with the principle of 'three strategies, two curves'. 'Three strategies' here lie in innovation, globalization and end-to-end product solutions. 'Two curves' mean that on one hand, ZTE sticks to solidifying its position, keeping the steady growth of operators' business in the first curve while on the other hand, ZTE will create its new horizon to achieve the rapid growth of government and enterprise business, terminals business and new business in the second curve.

Meanwhile, ZTE will be committed to becoming a highly resilient operating organization to adapt to the challenge of the uncertainty in the new normal, and adhere to a green and low-carbon strategy to achieve the company's long-term sustainable development.

According to Mr. Xie, ZTE aims to be included in the Fortune Global 500 list in next two to three years by maintaining a robust annual growth rate.

Here comes the original speech as follows:

Dear friends, good morning, good afternoon, and good evening. It's a pleasure for me to share with you ZTE's role, objective, and strategy in the era of digital economy. Five years has passed since our last Global Analyst Conference. During this period, we have witnessed great changes in the global environment and in ZTE. Today, ZTE has defined its new vision and mission, and is forging ahead towards the goal of creating greater value despite various challenges. Through the Global Analyst Conference, we hope you will know more about ZTE and feel free to voice your opinions.

Committed to becoming "the driver of digital economy" in the new era

As you may know, ZTE was founded in 1985, with the aspiration of bringing everyone affordable phone calls and thus realizing convenient communication. From the very beginning, ZTE has been committed to telecommunications and independent innovation.

For 36 years, we have been staying true to our original aspiration, and striving to connect "individuals, families, enterprises, and society" with ceaseless efforts and innovation. We are determined to fulfill our vision and mission, that is, "to enable connectivity and trust everywhere," and "to connect the world with continuous innovation for a better future."

Now, ZTE has grown from CT to ICT field. We have developed core digital technology, such as chipsets, databases, and operating systems; we provide complete cloud-network-end solutions; and we use intelligent and efficient tools for network deployment, O&M, and management. In addition, we are committed to sustainable development with green technology. With our digital solutions, we aim to be "a driver of digital economy", providing efficient and reliable digital infrastructure.

Solidifying its position with innovative initiatives, towards the Fortune Global 500

To fulfill this role, we have formulated the specific development strategy, to which the year 2021 is really crucial. In the strategy period from 2020 to 2021, our goal is to maintain robust growth of the business in the 1st curve by further participating in China's 5G construction and improving the market position of our key products overseas. Meanwhile, we hope to promote the business development in the 2nd curve through strengthening investment in the enterprise business, adjusting the structure of consumer business, and expanding new business. In the next strategy period, we resolve to maintain high-quality growth with a solid foundation in the 1st curve, and more importantly, create new horizons in the 2nd curve to achieve rapid growth.

Our objective for the next period is to strengthen ZTE's resilience to agilely address risks and seize opportunities in new business, and sustain annual growth to be ranked among the world's top 500 companies.

Now, let's take a look at our performance in the current strategy period. Against the backdrop of the pandemic and ever-changing global environment, we have basically achieved our goal of high-quality growth by promoting technological innovation and strengthening healthy and efficient operations. In 2020, our operator, enterprise, and consumer business witnessed noticeable growth, with the revenue increasing by 11.8% and the operating cash flow increasing by 37.4%.

In 2021, we have maintained high-quality growth and increased profitability. As shown in the financial report of the first half year, our revenue has scaled RMB53 billion with a year-on-year growth of 12.4%, and the revenue has grown by over 10% in both Chinese and overseas markets. Through continuous cost restructuring, our gross profit margin has increased to 36.1%, an increase of 2.7%. The net operating cash flow in the first half year also reached a record high. In operator business, we have maintained steady growth with a larger market share of 5G wireless, core network, and bearer network products in China. Our revenue of enterprise business grew by 17.7% in H1, with Chinese enterprise business increasing by over 50% and server and storage products doubled. The revenue from consumer business hit RMB12.3 billion, with an increase of 66.6%. Specifically, the revenue from home terminals and smartphones witnessed an increase of over 90% and 40%, respectively.

Sticking to the principle of "three directions, two curves" to achieve the sustainable development

We are embracing the next strategy period in 2022, which is essential to ZTE's future development.

In that period, we will focus on innovation, globalization, and end-to-end solutions to pursue progress while ensuring stability in the 1st curve, and seek rapid enhancement in the 2nd curve, so as to achieve sustainable development.

First, innovations. ZTE has been a company dedicated to independent innovations since its foundation. Our core competence lies in innovative technology that can create value for customers. For instance, we launched the ZXJ10 in the 1990s, which was China's first large-capacity digital SPC switching system; we presented the SDR base station in 2009; and with the Pre5G Massive MIMO solutions, we won the Best Mobile Technology Breakthrough award at MWC 2016 and the CTO's Choice 2016 award. Concentrating on "connectivity" and "computing power", we will strengthen the development of such core technologies as chipsets, algorithm, and architecture, and further the exploration and R&D of key products and technologies.

Regarding connectivity, we aim to speed up the R&D of 5G-advanced technology to create the greatest value. Also, we have started the research on 6G, and will strive to accelerate the application of key technologies, such as reconfigurable intelligent surface (RIS). In addition, we are putting in more efforts to enhance optical network performance. For example, we have significantly increased the transmission capacity of all-optical networks. As for computing power, we will enhance the R&D of the next-generation cloud infrastructure, and further integrate AI and big data into PaaS and SaaS. What's more, we attach great importance to green design for sustainable development. To be specific, we adopt new materials, components, and design to reduce power consumption of equipment, and use such technologies as AI to improve power efficiency during network operations via intelligent control.

ZTE will increase investment and provide strong support for innovations. We have established the "Future Lab" for the exploration and R&D of prospective technologies. We have also partnered with top universities and research institutes, thus establishing long-term cooperation mechanisms for innovations. At present, we have launched over 800 projects jointly with our partners in the fields of CT and advanced manufacturing. Through all these efforts, we expect to promote technological innovation and create more value with partners from different industries.

Second, further globalization. The company is committed to globalization based on our commitment to compliance, cybersecurity, and business continuity management. In operator business, namely the 1st curve, we aim to maintain solid growth in global markets.

In Chinese markets, we are devoted to growing from a main supplier to a top-tier supplier, which requires a larger market share of our key products. More importantly, we should stimulate customers' demands instead of meeting requirements only, making a leap from a follower to a leader in the market. To achieve this goal, we will make further improvement in product innovation, agile R&D, and efficient delivery.

In overseas markets, we will focus on high-priority markets and strategic products. Specifically, we plan to increase the investment in emerging Asian markets, leading operator markets, and strategic European markets, and optimize our product presence through construction of 5G networks as well as fixed optical networks, reconstruction of existing 4G networks, upgrade of transport networks, and iteration of smartphones and home terminals. We will seize the opportunities in the changing global environment to guarantee healthy operations and steady growth.

Third, end–to-end solutions. As a part of the end-to-end solutions, terminal devices are essential to ZTE's future growth. After organizational restructuring and brand integration, we are now working with more channel partners, and offering a comprehensive product portfolio of terminal devices, including smartphones, industrial terminals, home information terminals, and integrated innovation terminals.

With the increasing competitiveness, ZTE will promote its terminal products in both China and overseas markets. Through continuous innovation and further investments, ZTE is bound to take a lead in the terminal business, scaling new heights in China and maintaining steady growth overseas. In 2021, we plan to deliver more than 100 million consumer devices, of which 50% will carry our self-developed chipsets.

Enhancing the initiative capabilities to achieve rapid growth of the business in the 2nd curve

After consolidating the business in the 1st curve, our key task in the next strategy period is to achieve rapid growth of the business in the 2nd curve.

We will invest more in the enterprise business in terms of marketing, channels, and solutions. Also, the company will integrate internal resources, namely, to give full play to our overall advantages in branding, supply chain, and cloud-network ecosystem, thus facilitating the growth of enterprise business. Regarding capability building of channels, we will comprehensively enhance our services by continuously improving IT resources, processes, incentives, and training.

In addition, we will enhance the competitiveness of key products, including data communications, server and storage, distributed database, and data center products, and further enhance solution marketing in key sectors, such as e-government, energy, finance, Internet, and transportation. By providing integrated, scenario-based solutions, we aim to improve our overall competence in the enterprise market.

To achieve rapid growth in the 2nd curve, we also need to develop new business, such as automotive electronics and digital transformation.

In March 2021, ZTE set up the automotive electronics product line, aiming to provide underlying technology and core components of digital vehicles, and intelligent connected products and solutions. By working with partners, ZTE is committed to providing customized and ultimate automotive experience, and eventually create a network of intelligent vehicles, optimal routes, and powerful clouds. Our products range from chipsets, hardware and software platforms, to intelligent driving algorithms, and intelligent vehicle infrastructure. What's worth mentioning, we signed strategic cooperation agreements with China First Auto Works and Shanghai Automotive Industry Corporation this summer.

Moreover, we strive to seize the business opportunities brought by corporate digitalization. In this regard, ZTE has been applying cloud technology for digitalization of its office work, R&D, and operations, thus building a cloudified company. Through practices, we have now formulated our methodology, and developed a full series of modular products and solutions. That is to say, ZTE has become a provider of digital transformation services for enterprises. ZTE's digital transformation solutions cover cloud-network foundation, data platforms, unified portals, digital office, digital production, and digital cybersecurity. With these modular component libraries, ZTE provides targeted services for various fields of corporate operations, accelerating the digital transformation of enterprises.

By grasping the opportunities in such new markets, ZTE is bound to achieve the rapid development of its business in the 2nd curve.

Building ZTE's resilience to grapple with the uncertainty of the new normal

I've introduced ZTE's strategy to promote business growth in the 1st and 2nd curves, and to achieve this goal, we need to develop the capability of guaranteeing sustainable development.

Since the outbreak of COVID-19, the global changes have alerted us to numerous uncertainties in addition to the existing challenges. We have realized that the key to addressing uncertainties is resilience, which enables us to quickly adapt to unexpected changes. Towards the next strategy period, we are committed to building ZTE into a resilient organization, further enhancing its capabilities of anticipation, cushioning, and adaptation and shaping. Therefore, we will be able to ensure early discovery, strong vitality, and fast recovery when facing operational risks.

Agility makes success. In addition to resilience, we should also respond more agilely to risks. The key to success is to firmly promote digital transformation, expand and smooth value chains inside and outside the company, and optimize the whole processes with the use of big data, thus guaranteeing agile operations of the company.

As for building a resilient organization, digital transformation is a prerequisite, and can also enhance the operational quality and efficiency of the company.

In terms of in-house office work, we have Pocket ZTE, a smartphone app that enables mobile office and guarantees business continuity. At the beginning of 2020, our self-developed office cloud and R&D cloud allowed over 30,000 employees to work from home, achieving 95% work efficiency on the first workday. Today, we will get ready for complete telecommuting in several hours with our digital platforms, while maintaining the same efficiency as working at office.

Regarding supply chain, we have developed new networks, models, and platforms through business process reengineering and IT system restructuring. The former Shenzhen-centered supply chain has been transformed into a supply chain network with numerous centers located in Shenzhen, Heyuan, Nanjing, Xi'an, and Changsha, involving various ports, shipment centers, manufacturing bases, and factories. In addition, we have put our business online and achieved intelligent management of key business through big data and AI, which displays demand-supply changes and risks in real time. We have set up an intelligent operation center, dramatically enhancing the resilience of our supply chain network and guaranteeing business continuity.

Our resilience in marketing and engineering delivery is enhanced with the use of digital technology. Facing the challenges posed by the pandemic, we swiftly established online channels for visiting, demonstration, exhibition, and testing, ensuring smooth communication with customers. What's more, we have built a global cloud delivery center. By utilizing end-to-end automation tools and digital systems, we provide operators with contactless and instant network deployment and O&M. With our cloud solutions, global users can enjoy easy services on over 200 networks.

In the next period, we will deepen digital transformation to enhance our efficiency in operation, R&D, production, and external business, thus developing into a cloudified company with resilient supply chain, high R&D compatibility, quick-response operations, and flexible delivery.

Regarding sustainable development, ZTE always adheres to a green development strategy. We aim to provide operators with the green ICT foundation, and empower vertical industries with digital innovation to enhance energy efficiency. As for ZTE, we are committed to low-carbon operations through green production and circular economy, thus contributing to the reduction of carbon emissions.

At this pivotal point of ZTE's development, we look forward to building a win-win future with customers and partners based on openness and cooperation. Amid the uncertainties in the global context, ZTE will adhere to its development strategy, striving to respond to risks with resilience, and creating greater value through innovation. Working with our customers and partners around the globe, we are confident to enable connectivity and trust everywhere.

Thank you.

Media Contact:
Margaret Ma
ZTE Corporation
Tel: +86 755 26775189
Email: ma.gaili@zte.com.cn

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