20 Years History of ZTE Corporation

    Huang Guo

 

The overseas market has become ZTE’s strategic market. ZTE has already started partnership with over 150 operators in over 60 countries around the world.  The future ZTE will base on international talents, international market and international investment to face new challenges, forge an international ZTE brand, and build ZTE into a world-leading enterprise.

 

In February 1985, a jointly owned electronics firm registered with a starting capital of RMB 2.8 million was established in Shenzhen, South China. It was Zhongxing Semiconductor Co., Ltd., the former ZTE Corporation known as a "nobody" at that time. Looking back over the past 20 years, we see four major phases in the life of ZTE. The company had already become China’s largest listed telecommunications equipment manufacturer and the "fastest-growing telecommunication manufacturer in the world" (Business Week of the U.S). While having the past 20 years of history, on the way from "good to great" to build a world-class enterprise and an international brand, ZTE still has a long road ahead.

1985-1992: Carving out a Way with Hardship
In 1985, Zhongxing Semiconductor Co., Ltd. was established, with a registered capital of RMB 2.8 million. This small firm survived by processing with provided materials in its first days and the turnover by the year-end reached RMB 350 000 with the products of electronic watch, electronic organ, telephone set, etc.
In June 1986, a research and development team with eight members was established to develop 68-line analog space division Private Branch Exchange (PBX). In June 1987, the
ZX-60 Stored Program Controlled (SPC) space division exchange surfaced and it was certified and licensed (in July) by the former Ministry of Posts and Telecommunications (MPT) of China. This was the first product that the Company independently developed, and it marked the first step the Company took into the telecommunications industry.


    Since the second half of 1987, the Company has embarked on the R&D of user-class digital SPC exchange. At that time, it was the crossbar system being widely applied in the telephone exchange, as the digital SPC exchange had just been introduced from abroad and was little known to domestic starters including the Company. In a word, the Company had to start from scratch to catch up. In November 1989, the 500-line user-class SPC exchange (ZX500) came out and passed the test by the MPT of China. This ZX500 was accepted as the first homegrown digital SPC exchange of China with independent intellectual property rights.

    In March 1990, while optimizing ZX500 and starting mass trial production of ZX500, the Company determined to research and develop the carrier-class digital SPC exchange. In December of 1992, ZX500A surfaced. It’s the
small-capacity digital carrier-class exchange, which was tailor-made for the countryside C5 end-office reconstruction to adapt to a digital network. It was then deployed for trial on three networks in both Jiangsu and Jiangxi provinces of China at the same time. With the abundant trunk interfaces that were agreeable with different systems and the better cost performance as compared with exported counterparts, The ZX500A was hailed by the customers and it directly led to a booming "countryside telephony reform" in China. While pioneering into the countryside telephony market, the homegrown ZX500A paved the way for further development of the Company.

1993-1996: Speeding up on a Highway with Strength
In March 1993, Zhongxing New Telecommunication Equipment Co., Ltd. was registered with a capital of RMB
3 million. Based on the past operation experience, the Company established a "state-owned and private-run" operation system which was totally new in China at that time.

    In November 1993, the self-developed ZXJ2000 digital carrier-class exchange was certified and licensed by the MPT of China. The ZXJ2000 was awarded as "National New Product of 1994", and as "Innovative Scientific Star" by China Branch of the UN Technological Information Promotion System (TIPS). While the ZXJ2000 exchange was in production, the Company started the R&D of 2500-line digital user-class (private network) SPC exchange that was licensed by the MPT of China in May of 1994. This product (by the name of ZXJ2000A) opened the private network markets with buyers flooding in from medium-and large-scale enterprises, hotels, and railways and electric power departments of the Chinese government.


    In September 1993, a R&D  institute was established in Nanjing to develop the large-capacity carrier-class digital SPC exchange. In November 1995, ZXJ10 was licensed by the MPT of China for network entry. It was one of the three main exchange models developed by  domestic enterprises with an end-office capacity of 170 000 lines. According to the experts from the MPT, ZXJ10 was "the optimal model as good as a world-class counterpart in the 1990s".

    In August 1994, a research and development institute was established in Shanghai that focused on the R&D of wireless and access products. The access network products of this institute won the unanimous praise of the expert team from Directorate General for Telecommunications and Post (DGTP). That included the assessment of "a leading product in China in terms of proven technology and progress, and it can even overpass some foreign counterparts in these aspects". As a matter of fact, this product was the first of this kind for telecommunications network optimization with its development abreast with other big world names in this field.

    In August 1995, the Company became the first in China to be certified with ISO 9001 authentication as a telecommunication equipment vendor.

    In February 1996, after a whole year of research work, the Company put forward the strategy of
"Three Expansions" to suit itself to the development plan of the China’s telecom network. Expansion One was from switching equipment only to a comprehensive product structure containing switching, transport, access, videoconferencing and power supply. Expansion Two was from the rural call to local call, and Expansion Three was from domestic market to overseas market. The strategy not only reflected the growing strength of the Company, but also showed to the world its ambition to grow into a comprehensive telecom equipment vendor on the international stage.

    In June 1996, the Company was chosen, along with another telecom player, as one of the 300 key state-run enterprises by the State Council.

    In the year of 1996, the contract sales of the Company reached a record of RMB 600 million, a value increase of state-owned assets of over 100 times and the net assets jumped from
RMB 3 million to RMB 400 million.

1997-2003: Taking off the Ground with Global View
ZTE Corporation was established and listed in Shenzhen Stock Exchange. It was the first state-owned telecom equipment manufacturer in China that went public.

    ZTE started offering "A" Shares on October 6, 1997 and on November 18 of the year, ZTE (Stock Code: 0063) was listed on Shenzhen Stock Exchange. The listing has helped ZTE to pick up its development pace since.
Out of the total 250 million share capital with a par value of RMB 1 yuan, 65 million circulation shares were available to the public at the issue price of RMB 6.81 per share, which rose sharply to RMB 21.81 on the first day of trading. Even in the later boom-bust cycles of the stock market, the hi-tech blue chip of ZTE has always kept on a healthy and stable rise on the Shenzhen Stock Exchange.


    In October 1998, by allotment of shares, the Company’s share capital increased to 325 million shares. In 1999, the share capital again increased to 344.5 million shares by another share allotment. In 2000, with the.GIFt and rationed shares, the share capital reached the total of 413.4 million shares. In March 2001, the Company successfully issued 50 million additional shares and raised RMB 1.6 billion, which was then committed to the R&D of optical, mobile and data communications. According to a survey, dated November 25, 1998 by Security Times, ZTE was on the top of the list in terms of public reputation and growth potential in the point of view of institutional and retail investors.

    The years of 2001 and 2002 both witnessed an annual growth of 30%. In 2002, the Company recorded a purchase order amount of RMB 16.8 billion. The Company was thereby cited as the successful enterprise of the year in China’s communication market by CCID Consulting. It also ranked the first among the top ten enterprises in China’s communication industry by Communications Weekly, and the second among Chinese communication enterprises with the greatest growth potential by the Communications World.

    In January 2002, the establishment of the Mobile Phone Division signified the Company’s ambition to go into the terminal market. This step made ZTE one of the few terminal vendors who provide a full range of mobile phones of the three systems (i.e., GSM, CDMA and PHS).

    In 2003, the Company’s three major product series, i.e., wireless, network and terminal (mobile phone), all have grown considerably. Better still, years of endeavors in the overseas market started to pay back. The three growing product series and the overseas expansion worked together to push the Company to a higher level in this year. On January 8, 2004, the Board Announcement of the Company showed a record of new contract sales of RMB 25.19 billion in2003, represented a yearly growth of 50%. This included a RMB 4.82 billion from the mobile phone sales, represented a yearly increase of 66.3%. Also included US$ 610 million from the overseas market, represented a yearly increase of over 100%. The amount of shipment reached RMB 21.2 billion that represented a yearly increase of 58.2%. All these were the result of the customer-centered strategy and the implementation of the appropriate marketing and product differentiation the Company conducted. In 2001-2003, ZTE kept on a sales growth of 34.1% and become one of the most outstanding telecom equipment vendors with the most differentiated competitive strengths.

    In June 2003, Shenzhen ZTE Corporation has been renamed to "ZTE Corporation" to suit the Company’s determination to expand its operations overseas over a long time.

2004-Now: Pursuing Excellence with Confidence
In January 2004, new leaders were elected in the directorate meeting to build new leadership. Hou Weigui was elected Chairman of the Board and Yin Yimin, President of the Company. The overseas market, mobile phone and 3G were pointed out as three principal growth sources of the Company. Particularly the overseas market made a historical turnover of US$1.644 billion (over US$1 billion for the first time in 2004), thus ushering in a new era in the history of the Company to build its international name.

    The strategy of "overseas expansion, mobile phone and 3G" idea proved right in October, 2004. At that time ZTE raised over HK$3.5 billion by also offering its H shares on the Main Board of the Hong Kong Stock Exchange. This successful offering was oversubscribed by 253 times. ZTE is the first Chinese "A share" company to seek an "H share" listing in Hong Kong. It was accepted widely as a milestone in the stock and security history of China and it has made such a buzz in the Chinese economy in 2004.


    All three revenue sources, the wireless products, the network data products and the mobile phones have grown by leaps and bounds in this year. The high-end products have won favors of operators at home and abroad and started to open more developed markets. In 2004, the Company generated a revenue of RMB 34 billion, of which
RMB 13.6 billion (US$1.644 billion) was contributed by overseas contract sales, up 169.5% from a year ago. Over the whole year, more than 10 million sets of mobile phones were sold, up 100% from a year ago. This year witnessed the tremendous growth of the Company in both international and domestic markets, proving that it is the fastest growing and most robust telecom equipment manufacturer in China.

    The overseas market has become ZTE’s strategic market. ZTE has already started partnership with over 150 operators in over 60 countries around the world.  The future ZTE will base on international talents, international market and international investment to face new challenges, forge an international ZTE brand, and build ZTE into a
world-leading enterprise.

Manuscript received: 2005-03-28

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