Although the industry has doubts about its long-term prospects, ZTE has expressed optimistic expectations as operators increase their investment in the next generation of 5G networks. Ming Xiao told Light Reading that ZTE's long-term goal is to increase its share of the overall equipment market from about one-tenth to about one-quarter.
Given ZTE's previous problems, industry observers may sneer at such an ambitious goal. Whether it seems reasonable or not, ZTE's industry perception that its equipment and services are priced competitively should help it reach a deal. But the company insists that its technological strength and support for its customers are really important. It is investing more in research and development at the expense of profit margins. Ming Xiao said ZTE has been ahead of its Western rivals for many years in Massive MIMO, a complex antenna technology for 5G networks.
Analysts and operators indicated that ZTE's product quality is beyond doubt. Uncertainty lies in regulation. In the first half of this year, the United States banned its companies from selling parts to ZTE, which had a major impact on ZTE's customers. If such a ban re-emerges, it could have a devastating impact on ZTE, prompting its customers to switch to less risky suppliers. Meanwhile, Western governments seem to be increasingly worried about ZTE and another Chinese equipment maker.HUAWEIProducts may have "back door". Australia and the United States have issued a ban on suppliers in China.
In the market in which it operates, ZTE appears to have recovered significantly from the impact of the US equipment ban. The company's recent third-quarter revenue fell by just 14 cents to about $2.8 billion, while the decline in wireless access network (RAN) appeared to be even smaller. "its shipments have returned to pre-ban levels, with third-quarter revenue falling at a single-digit rate, reflecting market conditions more than any supply or production restrictions." Market research firm Dell
In fact, according to Dell
Figure: global RAN supplier rankings (based on revenue). Source: Dell
Can ZTE's recovery continue? One expert, who declined to be named, said that after the interruption in the second quarter, customers quickly resumed business contacts with ZTE to solve the problem of backup demand. The risk is that some customers will upgrade to 5G as an opportunity to phase out Chinese suppliers. If this happens, Samsung will be able to surpass ZTE again.
However, Samsung's goal of occupying a fifth of the global 5G market by 2020 seems as optimistic as ZTE's. Although Samsung has won a place in the 5G market in the U.S. - the absence of Huawei and ZTE has given it market space - its sense of presence in Europe remains weak. Samsung has worked with 4G and other disruptive new entrants such as 3 UK and India Reliance Jio. But when 3 chose 5G suppliers, the operator chose HUAWEI. "It's very difficult for them to enter the Western European market." An anonymous source said.
Samsung's advantage seems to be in the HF equipment market, especially in the 28GHz band. In general, this is seen as a way to provide high-speed broadband services when the fixed network coverage is not enough. It is in this area that Samsung is cooperating with the US telecom giant Verizon. Samsung's and Orange's experiments in Romania are also based on the use of 5G as a residential breadth technology, and local fixed-line services are still not widely covered. 3 UK believes that there is great potential to use 5G to support residential broadband services, but the operator still lacks high frequency spectrum and is investing in medium frequency spectrum in the range of 3.4-3.8GHz.
Light Reading commented that, regardless of Samsung and ZTE's future development, their radical instincts would delight operators, who feared that after years of industry consolidation, the current choice of equipment suppliers was limited. If these two companies can impose pricing and technical pressure on market leaders and use them,DevelopmentIt will be better to fill the important niche market.