ZTE Plans 2014 Smart Watch Launch

ZTE, the Chinese mobile device maker, will begin selling smart watches next quarter, signalling that the nascent market for wearable connected devices is already becoming crowded with lower-priced alternatives.

Prices for such wearable technology are forecast by analysts to fall quickly. CCS Insight predicted that growth in the segment “will spike when smartwatch prices drop to significantly lower levels than today”. It expects sales of small Android devices will exceed 100m by 2015 after initial sluggish demand.

He Shiyou, executive vice-president and head of the handset business of Shenzhen-based ZTE, told the Financial Times that the company wanted to make the jump out of the “second tier” of smartphone makers into the top three manufacturers.

He said ZTE was either fourth or fifth in the rankings at present among the group of manufacturers all accounting for about 5 per cent each of market share.

As part of plans for next year, ZTE is investing in the research and development of so-called “wearable” technology, including smart watches and glasses. “ZTE wearable smart watches will be launched as early as the first quarter,” said Mr He.

He added that other wearable technology, such as connected glasses, would take longer to develop. Wearable technology is forecast by analysts to follow a similar path as tablet computers, which have rapidly become a commodity product given the stream of cheap and largely indistinguishable Android-based devices.

Mr He said that ZTE was considering making corporate acquisitions or mergers to grow market share in a smartphone market that he described as “fiercely competitive”.

He declined to name any specific targets and added that any deal would need to be complementary. “There are complex factors involved,” he said.

About 70 per cent of ZTE’s shipments this year will be smartphones, rather than low technology “feature phones”, he said. The focus is now on the higher end of the market, rather than entry-level products that the Chinese handset maker has traditionally made.

ZTE is also working on creating a recognised brand to western phone buyers through improved distribution as well as sponsorships and advertising.

“The next three years will be critical for ZTE’s devices business. There is a window of opportunity to push ZTE into the top three in terms of market share,” he said.

Mr He said the company would again begin producing phones using Microsoft’s Windows platform after the US group completes the acquisition of Nokia. Microsoft executives visited ZTE this month to reassure the company that the US group wanted to maintain a wide network of handset makers rather than simply make its own Windows phones.

“Initially we were hesitant [but] after clarification from Microsoft about industry support we are willing to commit to Windows platform again.”

Mr He is head of the company’s devices business, which accounts for about 30 per cent of group revenues. The remainder is made by its network equipment operations.

As with Huawei, its rival Chinese telecoms equipment group, ZTE’s infrastructure equipment business has been hindered by accusations by politicians of links to the Chinese state. Mr He said that the group was “working with the relevant authorities” to “challenge the political conservatism” about its equipment, but that the handset business had not been affected by the US concerns.