Tearing off the white label

In July, ZTE held a press conference in London to announce a UK version of its website and its intention to step out of the shadows and push its own brand. Through a deal with local distribution channel Brightpoint, ZTE will have its own-label handsets on UK shelves later this year.

To date, the company’s white label strategy has dovetailed with its adoption of the Android platform to result in ZTE becoming the world’s sixth largest provider of mobile devices during the first quarter of this year. According to statistics from analyst firm Gartner, ZTE just edged out HTC with 2.3 per cent market share in 1Q11 having shifted 9.8 million devices, compared to HTC’s 2.2 per cent or 9.3 million units. Now ZTE is hot on the heels of troubled Canadian firm RIM which has three per cent market share, having shifted 13 million BlackBerrys.

It’s interesting that ZTE has just overtaken HTC, given that the Taiwanese handset firm, once dubbed ‘the hottest tech outfit you never heard of’, followed a similar arc in its development. The strategy worked out well for HTC, which also started out in the white label business, backed the Android OS and is now one of the most recognised smartphone brands on the market. So, with a focus on its own-brand smartphones, ZTE said it expects to ship more than 80 million handsets this year, up from 60 million units in 2010.

Wu Sa, director of mobile device operations, ZTE UK, said: “ZTE made a commitment at the start of 2011 to alter its strategy from being a feature phone-centric supplier to producing much higher-end smartphones and delivering an enhanced user experience to the mass market. We are working closely with Brightpoint to launch smartphones into the UK market this year. We expect ZTE to become a household name synonymous with high quality smartphones and tablets.”

The firm’s off to a good start. ZTE’s Blade touch screen Android handset has already racked up sales in excess of two million, making it one of the best selling smartphones globally. The device, which was first sold in the UK in 2010 under the brand “San Francisco” by carrier Orange, is sold in 30 regions, with ZTE saying it has “successfully penetrated Japan and Finland, the home markets of major ZTE competitors.” In fact, keen to further its credentials in the popularity stakes, ZTE claims that the Blade’s popularity “actually exceeded that of the iPhone 4 in the UK at one stage in early 2011,” adding that the device had been “promoted aggressively” through special offer pricing in Orange’s retail outlets over the Christmas holiday period. The strategy apparently paid off, with the device becoming Orange’s top seller during that time, aimed as it was at the more budget-conscious sector of the UK market.

ZTE also reported strong sales of the handset in Japan, where a last minute requirement from operator Softbank to ship the device, known locally as the “Softbank Venus”, with Android 2.2 is credited with its healthy performance in the market. Naturally, the Blade was also customised for the domestic market, where it is available on China Telecom’s CDMA EVDO network and China Mobile’s TD-SCDMA network.

Pushing its own brand might have knock on benefits for ZTE in terms of revenue generation. As the firm typically delivers operator-branded devices to its customers at wholesale cost, by reallocating its manufacturing resources for its own label units, the company could cause a shortfall in units available for its customers. In that case the carriers would be forced to stock the vendor branded devices at wholesales rates or buy them through the regular distribution channels at greater expense and rebadge them at their own cost. Whichever way it goes, it’s a win-win for ZTE.

“The European smartphone market is at its hottest right now, and it will stay hot for several years to come,” said John Delaney, research director for Consumer Mobile with industry analyst IDC. “Between the start of 2011 and the end of 2015, we expect over 725 million smartphones to be purchased in Europe, but while the focus in smartphones tends to be concentrated on the software platform, some of the Asian vendors are reminding the industry that the hardware brand, too, can still be a powerful driver for success in the smartphone market.

Indeed, five of the top ten handset vendors are based in Asia: Samsung, LG, ZTE, HTC, and Huawei; or six if you count Japanese-Swedish venture Sony Ericsson.