Cheap phones from China quietly becoming a force in the U.S.

Category: Technology

What's the first name that comes to mind when you think about smartphones? Most of you would probably answer Apple, Samsung, HTC, LG or Motorola. That's because these are the brands that smile at you from posters and try to draw your attention in virtual world. There is another player in the game, though - one that seems inconspicuous but actually has huge potential. The player in question is Chinese manufacturer ZTE. Cheap phones made by this company are quietly becoming a force in the US.

How is this fairly unknown company able to do this? It's quite simple - by offering decent and at the same time inexpensive devices. For instance, the ZTE Maven for AT&T has specs somewhere between the iPhone 5 and 6 but it costs just $60 outright. And it's not even ZTE's cheapest handset. If you are on a really thigh budget, you can get a smaller prepaid smartphone for as little as $30. ZTE phones are available from all US major carriers, except for Verizon, and a number of smaller ones. It's a reason to be proud of because as Lixin Cheng, head of ZTE’s U.S. operations put it “We came from nowhere, and now we are a solid force.”

And a solid force it is, indeed. In the second quarter of 2015 8% of the US market share went to ZTE, which is almost twice of the share ZTE had in the first quarter of 2014. That ranks the company fourth among smartphone makers, with Apple leading the way, followed by Samsung and LG. It's interesting, especially since in its home market, China, the manufacturer is number 8 with just 3% of the market.

ZTE has been selling its products in the US for many years but its name was associated mostly with network routers and switches for mobile operators. In 2012 it seemed like the company could hit a rough patch after the House Intelligence Committee issued a report warning that China’s intelligence services could potentially use ZTE’s equipment for spying. ZTE, however, didn't take the accusations to heart and began selling smartphones in the US starting with small carriers such as Metro PCS and making its way up to major networks such as AT&T, T-Mobile and Sprint.

The manufacturer also sells its phones through a number of retailers including Wal-Mart, Target, and Best Buy. To boost the sales, ZTE is currently working with NBA’s Houston Rockets, the New York Knicks and Golden State Warriors, and upped its lobbying expenditures from $170,000 in 2011 to $950,000 last year.

At the moment, ZTE's main goal is to increase revenue. The company may have doubled its market share from 4.2% in 2014 to 8%, but during this time its revenue increased only by 4%, from $354 million to $369 million. That means ZTE has gained share only by making its phones cheaper.

ZTE's target group, at least in the US, are customers who want decent smartphones at budget-friendly prices. However, the company is perfectly capable of making high-end device. In July the manufacturer released the Axon Pro - a more premium handset that sells for $450 on its website, Amazon, eBay and Cheap Phones. It's hard to predict customers' response to the device, but ZTE is not worried at all. The company's strategy of offering decent and affordable phones seems to be working out pretty well for now. Peter Ruffo, senior director for government relations at ZTE’s U.S. arm, believes that the company's future is bright.