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ZTE mobile phone declines as a second-line brand
In the past, "China Cool Alliance" was closely associated with Chinese mobile phone manufacturers. Today, in the smartphone market, Huawei has climbed to third place globally and first in China, surpassing Samsung significantly. Lenovo also ranks among the top five globally, while ZTE, once a dominant player, now barely holds a spot in the top ten.
Why did ZTE fall behind in the smartphone era? In January 2016, ZTE's Executive Vice President and Terminal CEO, Zeng Xuezhang, sent an internal email of over 3,000 words reflecting on the company’s mobile phone performance and seeking ways to revive the brand. This letter quickly spread across the industry.
Huawei faced similar challenges in 2012 but managed to turn things around by cutting 80% of its product lines, rethinking its distribution strategy, and moving toward high-end models. Could Zeng’s internal letter be the start of ZTE's own path to recovery, much like Huawei’s?
Zeng revealed that ZTE had "lost three years," highlighting poor domestic performance. According to his report, ZTE shipped 56 million smartphones in 2015, falling short of its 60 million target. Internationally, sales in the U.S. rose over 30% year-on-year to 15 million units, maintaining fourth place. Sales in Asia-Pacific grew 120%, Europe and Africa by 400% and 100% respectively, and South America by 40%. However, the domestic market was a major issue—ZTE only sold 15 million units in China, far behind Huawei, Xiaomi, and even OPPO and Meizu.
Some industry experts questioned these numbers. Analyst Jiang Bojing pointed out that according to TrendForce, ZTE should have sold over 40 million units globally in 2015, not 56 million. Also, according to comScore data, ZTE wasn’t in the top four in the U.S. market, raising doubts about its Q4 performance.
Despite this, ZTE’s main issue remains the domestic market. With 15 million units sold, it’s comparable to its U.S. sales, but still lagging behind Huawei, Lenovo, and even emerging brands like Meizu.
Zeng set a 70 million unit target for 2016, acknowledging that the past three years were a lost opportunity for ZTE. He admitted that the company failed to keep up with consumer trends, missed the shift from feature phones to smartphones, and relied too heavily on traditional operator channels.
Jiang added that ZTE’s issues included poor pricing, low-quality products, and insufficient marketing. Many consumers criticized slow OS updates and weak brand presence. Even though ZTE leads in patent rankings, its image is still stuck in the "hands-on" era.
While ZTE has strengths, such as strong overseas expansion and innovation, its brand perception lags. Huawei focuses on high-end, Xiaomi on value, while ZTE struggles to find its identity.
Industry observers like Sun Wenping from the Shenzhen Mobile Phone Association believe ZTE lacks sensitivity to market changes. Though it has many patents, most are outdated, and product positioning is unclear. Huawei, in contrast, has clear segmentation—high-end for Huawei, low-end for Honor.
The domestic market is highly competitive, and only those who adapt can survive. Xiaomi is recovering, and new players like VIVO, OPPO, and LeTV are rising. Whether the market is saturated or not remains debated, but one thing is clear: those who fail to keep up will be left behind.
Nokia and Motorola are examples of companies that fell out of favor due to not evolving. For ZTE, the challenge is to learn from past mistakes and find a way back into the spotlight.