Interpretation of ZTE semi annual report: focus on 5g technology and talents

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Text / hedinghong
Source: yinxingcj
This year, affected by the new crown, global economic growth is under pressure. All countries hope that high-tech industry will drive the development of the whole industry and get out of the trough.
Communication technology is the key to open up all industries to enter the digital revolution. For example, 5g set off a medical technology revolution, such as remote diagnosis and treatment, wireless monitoring, epidemic early warning and so on. After the outbreak, relying on the broad domestic market and the continuous application of 5g in various fields, the signs of mutual transmission between upstream and downstream of the industry are very obvious.
According to the “analysis report on the operation of domestic mobile phone market in June 2020” issued by the Institute of communications and communications, under the background of the continuous decline of domestic mobile phone sales, 5g mobile phones have increased sharply against the trend, accounting for 61.2% of the total mobile phone sales in June.
In addition to the change of TOC market caused by 5g iteration, in the 5g application cases of GSMA this year, the success of a large number of enterprises’ industrial Internet of things is benefiting the whole industry, such as Valin Xianggang, Sany Heavy Industry, xinfengming and COMAC.
The application side stimulated the acceleration of 5g networking in the operation and maintenance link. After the disclosure of the three major telecom operators, China Telecom and China Mobile started the co construction and sharing of 5g network. In the first half of this year, China Telecom invested 20.8 billion yuan to build 80000 new base stations, and the number of active base stations also reached a record high of 210000.
The recovery of application and operation and maintenance market makes the demand of mobile phone, communication equipment (such as base station) and solutions blowout. As a domestic communications giant, ZTE’s strategy of focusing on technology and talents has achieved initial results.
One
The global market share of Chinese enterprises expands
On August 28, ZTE released its 2020 semi annual report. The financial report showed that in the first half of the year, ZTE achieved revenue of 47.2 billion yuan, a year-on-year increase of 5.81%, and a net profit of 1.86 billion yuan, a year-on-year increase of 26.3%.
The growth of revenue and net profit is only the appearance, but behind it is the improvement of the company’s hematopoietic capacity and internal management efficiency.
In the first two quarters, cash received from sales of goods and services increased by 18.6% year-on-year, making the net cash inflow of the quarter as high as 2.041 billion yuan.
On the cost side, the administrative expenses decreased by 274 million compared with last year, with a year-on-year decrease of 10.79%, and the management efficiency continued to improve.
In the early days of the outbreak, ZTE delivered a fairly resilient quarterly report. In the second quarter of 2020, with the recovery of domestic epidemic situation, 5g industry ushered in rapid development. Benefited from this, a number of financial indicators have increased significantly in the last three months. In the second quarter of 2020, the company achieved a revenue of 25.71 billion yuan, a year-on-year increase of 14.76%, a month on month growth of 19.69%; and a net profit of 1.077 billion yuan, a year-on-year increase of 38%.
According to the business division, ZTE’s operator network recorded 34.970 billion yuan of revenue in the first half of 2020. The revenue of government enterprise business was 4.816 billion yuan, and the gross profit rate was improved significantly; the business income of consumer business was 7.413 billion yuan, which was affected by the acceleration of domestic 5g construction, and the business growth of operators was strong.
ZTE financial data growth, but also let the global 5g market competition pattern has changed significantly.
According to the latest report released by Dell ‘Oro group, ZTE’s 5g ran (wireless access network) market share increased rapidly from 9.3% in the first quarter to 16.4% in the second quarter, ranking among the top three in the industry in the world. This also led to a synchronous increase in the number of 5g base station deliveries. In the quarter, ZTE ranked second in the world with a market share of 30.5%.
In addition, ZTE’s overall revenue market share of wireless access ranked fourth in the world, increasing from 9.1% in the first quarter to 12.4%. The world market share of wireless base station shipment ranked second, increasing from 16.8% in the first quarter to 24.9%.
The report of Dell ‘Oro group not only reflects that ZTE’s share in the global 5g market has increased significantly, but also reflects that Chinese communication equipment manufacturers are in a dominant position in the global market competition. The shares of traditional equipment manufacturers such as Ericsson and Nokia have declined to varying degrees.
On the macro level, the national 5g policy has been issued intensively, promoting the industry’s accelerated development in four aspects, including network construction, application scenario cultivation, research and development, and security system. Many provinces plan to build 10000 new base stations this year. For example, the two sessions of the Zhejiang Provincial People’s Congress (NPC and CPPCC) have included in this year’s government work report the full coverage and construction of 50000 base stations above the county level.
On the micro level, the whole industry increased investment in scientific research. Taking ZTE as an example, the company focuses on 5g technology competitiveness and market competitiveness. In the first half of 2020, R & D investment reached 6.64 billion yuan, accounting for 14.1% of its operating revenue. From 2017 to 2019, the total R & D investment is 36.42 billion yuan, with an average annual investment of 12.14 billion yuan.
Through the speech made by ZTE’s management at the 2019 performance presentation meeting, we can see the deeper reasons: the communication industry is an industry with rapid evolution and fierce competition according to the market rules. Only by mastering the core technology can we support the construction of advantages in performance, cost and reliability of communication products.
Two
Insight into the market and focus on the main business
In the domestic communication industry, ZTE has laid out 5g early, and has sufficient technology and talent reserves.
At present, the company mainly focuses on the basic operating system, distributed database, core chip and other fields, and continues to strengthen the technical advantages in key fields.
In 5g bearing field, a full series of end-to-end products have been deployed in large scale. As of June this year, nearly 100000 terminals have been delivered. The ultra-high precision synchronization technology index has reached the level of “perfect synchronization” defined by 3GPP, and won the highest evaluation of global data “established player”.
The new generation of core chipsets, which are independently developed and designed for access, bearing and fixed network terminals, are put into commercial use in scale, further improve performance, integration and energy efficiency ratio, continuously strengthen algorithm accumulation and optimization, actively introduce industry-leading new architecture, new materials and new processes, comprehensively support product competitiveness, and help customers build 5g commercial network with high-quality performance.
At the same time, ZTE continues to deepen its digital and intelligent transformation, and its R & D and operational efficiency continues to improve.

From the perspective of subdivision field, the operator network has made breakthroughs in domestic and foreign markets, and is in the first camp of 5g industrialization.
In terms of government and enterprise business, ZTE mainly focuses on government, transportation, energy and finance, and plays a combination of “distributed precision cloud” and “deterministic precision cloud”. Together with more than 500 companies, ZTE has jointly explored 86 5g innovation application scenarios. In terms of consumer business, ZTE’s axon 20, the world’s first off screen camera phone, was launched after the appointment of a new terminal director.
The continuous improvement of the three main business benefits from the company’s huge investment in technology and talents.
“From 2020 to 2021, we will continue to maintain the introduction of fresh blood”, said Xu Ziyang, President of ZTE at the shareholders’ meeting in 2019. According to the research and development needs of key technologies, the management will take the recruitment of core talents as the top priority of the enterprise.
According to past data, ZTE has absorbed 6000 fresh graduates in 2019, which is one of the top three recruitment enterprises in Colleges and universities. In the 2021 school recruitment just launched, ZTE currently has more than 5000 + posts. In the critical period of 5g iteration, we can see how much they attach importance to talents.
Focusing on core technology and talent investment, ZTE has achieved core technology breakthroughs in many fields.
5g strategy has more than 5000 patents worldwide, ranking first in the world. In addition, ZTE currently has 74000 global patent applications and more than 36000 authorized patents. As a core technology, ZTE has applied for more than 4100 chip patents, covering developed countries and regions around the world.
The investment in talents and technology determines that ZTE can make a difference in the 5g era, and the management’s deployment of 5g strategy is also confirmed by the market.
Three
epilogue
In the semi annual report, ZTE predicted that “in the next five years, the global 5g business deployment will enter an all-round accelerated development stage, the industrial chain will rapidly mature, innovative applications will emerge vigorously, and the communication industry will enter a new round of great prosperity stage”. It is optimistic about ultra high definition video, AR / VR, automatic driving, etc.
In terms of ultra high definition video, ZTE provided 5g network and holographic imaging technology in the live broadcast of the two sessions. During the summit, ZTE launched the first 5g ar mobile phone solution in Asia.
With the construction of 5g infrastructure in full swing in China, ZTE takes the lead in accessing the field of ultra high definition video and AR / VR, seizing the technological highland, which is likely to bring new growth to the company in related fields.
ZTE’s success in technology and market is inseparable from its previous strategy of focusing on its main business, and its investment in technology and talents over the years.
As the pioneer of new infrastructure construction, 5g market is experiencing rapid growth with the continuous growth of users, the acceleration of application side commercialization process and the growing demand of operators.
In addition, this year is the year of 5g outbreak. From the growth trend of communication giants like ZTE, we can see that China is leading the global 5g development with innovation.
(statement: This article only represents the author’s point of view, not Sina’s position.)