Become one of the world's top 500 companies in two to three years How does ZTE achieve a leap forward?

Reading Chuang / Shenzhen Business Daily reporter Chen Shu

On October 25, with the theme of "Building a Road to the Digital Economy, Making Communication and Trust Ubiquitous", the three-day "ZTE 2021 Annual Global Analyst Conference" opened online. This is also five years later, ZTE restarted this important event for more than 100 industry analysts, financial analysts and media around the world. At the meeting, Xie Junshi, executive vice president and chief operating officer of ZTE, proposed that he hopes to enter the world's top 500 in two to three years by maintaining a steady annual growth rate. At present, the threshold for entering the world's top 500 is around 25 billion US dollars, about 160 billion yuan, and how does ZTE, which has just exceeded 100 billion yuan in revenue, exert its strength? Xie Junshi's answer is: facing the next strategic cycle, around the principle of "three major adherences, two curves" to achieve leapfrog development.

Solidify the cost and expand the new to achieve leapfrogging

In 2018, ZTE formulated a three-step strategy and formulated different measures according to the internal and external situation, including: the recovery period (2018-2019) to strengthen the focus and improve efficiency, adhere to the cash flow first; the development period (2020-2021) to consolidate the cost and expand the new, quality growth; the transcendence period (2022 and beyond) to comprehensively enhance the market share and achieve scale profitability. 2021 is a stage for ZTE to leapfrog from "development" to "transcendence". Facing the next strategic cycle, ZTE has also defined its development goal, that is, to build a highly resilient operational organization to adapt to risks and new formats. At the meeting, Xie Junshi put forward "three major insistences, two curves".

Among the "two curves", the "first curve" is mainly based on the operator's business, and it is necessary to "consolidate the cost" and maintain the growth momentum, and the "second curve" includes government and enterprises, terminals and new services, and it is necessary to increase the intensity of "innovation" to achieve rapid growth.

On the same day as the opening of the conference, ZTE released its financial report for the first three quarters of 2021. According to the data, from January to September this year, ZTE's revenue was 83.83 billion yuan, an increase of 13.1% year-on-year; the net profit attributable to the common shareholders of the listed company was 5.85 billion yuan, an increase of 115.8% year-on-year; the net profit attributable to the common shareholders of the listed company after deducting non-recurring gains and losses was 3.34 billion yuan, an increase of 130.9% year-on-year; and the basic earnings per share were 1.26 yuan. In the two major domestic and international markets, the three major businesses (operator network, government and enterprise affairs, and consumer business) have maintained a good growth trend. In addition, ZTE's revenue in the third quarter of this year was 30.75 billion yuan, the highest in the past three years, an increase of 14.2% year-on-year and 14.6% month-on-month.

In terms of operator networks, in the domestic operator scale collection and procurement projects announced in the second half of the year, the market share of key products such as ZTE high-end routers and high-end switches continued to increase. Overseas markets continue to optimize the pattern of advantageous products with the help of opportunities such as 4G modernization and 5G new infrastructure. It is worth mentioning that in the third quarter of this year, ZTE operators' network operating income increased by about 25% month-on-month.

In the "second curve" business, in terms of government and enterprise affairs, ZTE empowers thousands of industries through the digital capabilities of "one base and two wings", and the operating income of server and storage products in the first three quarters of 2021 doubled year-on-year, and the scale entered the leading companies in the financial, Internet, energy and other industries. In terms of consumer business, mobile phone revenue in the first three quarters increased by about 40% year-on-year, and household information terminal revenue increased by about 90% year-on-year. Ni Fei, senior vice president of ZTE and president of the terminal business unit, said at the meeting: "In the past year, ZTE terminals have shown a trend of 'rapid domestic growth and steady global improvement'. ”

By laying out innovative businesses such as automotive electronics and enterprise digitalization, ZTE is also exploring new paths for growth in the next strategic period. In March this year, ZTE set up an automotive electronics team, and positioned the automotive electronics business as a digital automotive basic capability, core component provider, intelligent network product and solution provider, and is committed to providing customers with basic software and hardware platforms related to automotive electronics, chips, and intelligent networking products for vehicle-road collaboration. At present, ZTE has reached strategic cooperation with CAR companies such as FAW and SAIC Motor.

Innovation revolves around connectivity and computing power

Xie Junshi said that the "three major insistences", that is, adhere to innovation, adhere to globalization, adhere to end-to-end product solutions.

At the beginning of its establishment, ZTE clearly defined the development principle of adhering to independent innovation. According to public information, from 2015 to 2019, ZTE's R&D investment was 12.2 billion yuan, 12.76 billion yuan, 12.96 billion yuan, 10.96 billion yuan and 12.548 billion yuan, respectively, which were above 10 billion yuan for five consecutive years. In 2020, the amount of R&D investment reached 14.797 billion yuan, accounting for 14.59% of revenue. The latest data show that in the first three quarters of this year, the company's R & D investment reached 14.17 billion yuan, accounting for 16.9% of operating income.

"In the next strategic cycle, we will continue to develop underlying technologies such as chips, algorithms, and architectures around the two major areas of 'connection' and 'computing power', and at the same time increase the exploration of key product technology areas and directions," Xie Junshi said. It is reported that in terms of connectivity, such as wireless networks, ZTE will continue to conduct research and development of 5G backward evolution related technologies, and has launched 6G research, and strive to gradually apply key technologies such as intelligent hypersurface technology in advance. In terms of computing power, on the one hand, we will strengthen the research and development of next-generation cloud infrastructure, strengthen the integration and application of AI and big data on the PaaS and SaaS layers, and on the other hand, invest in green and low-carbon design for sustainable development.

Xie Junshi said that internally, ZTE will continue to increase innovation investment and innovation organization support, such as the establishment of an innovation organization led by the "Future Lab" to explore and study forward-looking technologies. Externally, we will carry out extensive industry-university-research cooperation, and set up joint laboratories with a number of top universities and research institutions to form a long-term innovation cooperation mechanism.

On the basis of continuous innovation, ZTE adheres to the globalization strategy. In the "first curve" operator market, strive for the continuous improvement of global market share, including the Chinese market, "from meeting demand to leading demand, from following the market to leading the market". Overseas, key emerging markets in Asia, branches of the world's leading operators, and existing strategic markets in Europe will become the market direction of key investments, "grasping certain opportunities from an uncertain environment, achieving healthy operations and steady growth".

The "adhere to end-to-end product solutions" focuses on the terminal business. ZTE expects that in 2021, the total shipment volume of consumer products, including personal terminals and home terminals, will exceed 100 million units, of which more than 50% will use ZTE's self-developed chips.

Build a digital economy and enhance organizational resilience

In the course of 36 years of development, ZTE has realized the transformation from CT (communication technology) to ICT (information and communication technology) mode with its own technology accumulation. In 2020, ZTE put forward the positioning of "road builder of digital economy", through continuous technological innovation, downward root, and contribute to the country's economic and industrial transformation.

ZTE started its own digital transformation as early as 2016. In the ZTE production base in Nanjing Binjiang Development Zone, the 5G network has been fully covered, and the whole production process has deployed ten typical 5G applications such as cloud-based AGV, 8K machine vision, cloud-based PLC, intelligent warehousing, industrial wear-wearing, digital twin, and production site monitoring, and it is expected that the full unmanned production workshop will soon be realized. Since its official start of operation in March 2020, the base has been able to produce five 5G base stations per minute and send them to the world, and has achieved a 40% reduction in labor, a 20% reduction in the defective rate, a 30% reduction in the production cycle, and a 40% increase in production efficiency. ZTE hopes to "eat the crab first" by itself, and then copy the experience and solutions of digital transformation to the outside world.

At present, the market demand for digital services is becoming increasingly clear, and many public cloud service providers and telecom operators are infiltrating across borders and striving to seize the opportunity in the early stage of the new round of digital economy. ZTE believes that combining the characteristics of digital services and further consolidating the digital foundation will effectively help operators to achieve the transformation from traditional communication service providers to future digital service providers, and will also accelerate the digital and intelligent transformation and upgrading of society. Cui Li, Chief Development Officer of ZTE, said: "ZTE hopes to consolidate the digital foundation through the 'fixed' network, 'expand' cloud and 'xing' industry, help operators transform, and better embrace the digital era." ”

"Since the outbreak of THE NEW CROWN in 2020, the changes in the global political and economic situation have made us more aware that in addition to the challenges of visible certainty, there will be more invisible uncertainty risks in the future. The core of dealing with uncertainty lies in how to enhance organizational resilience", Xie Junshi said, facing the next stage of development, ZTE will be committed to building a highly resilient organization, comprehensively improving the ability to predict, immunity and adaptability, in the face of the impact of business risks, can be found early, recover quickly, see far.