The symbolism of the two ZTE-branded articulated trailers parked outside the Business Design Centre in north London earlier this month may have been unintended but cannot have been lost on many of those visiting the Chinese telecommunications group’s roadshow. The Chinese juggernaut has arrived.
The trailers and a host of ZTE executives were in London at the end of a nine-country tour of Europe under the slogan: “Let’s 3G with ZTE”.
But there was more to this European debut tour than 3G technology as ZTE, China’s largest listed telecoms equipment manufacturer, showed off ADSL kit, fixed-mobile convergence systems and a wealth of other technologies alongside CDMA and UMTS.
Watching (and worrying about) the activities of Chinese manufacturers picking up the “Going Global” strategy baton and moving aggressively into overseas markets has been one of the obsessions of other established technology groups in recent years.
For those clinging precariously to positions in a telecoms infrastructure world just now emerging from the industry’s four-year nuclear winter, the emergence of low cost competitors – such as ZTE and Huawei – could hardly be less welcome.
But they had better get used to it. Milling around inside the Building Design Centre after a presentation by Fang Rong, ZTE vice-president, are three dozen potential customers.
The youthful Ms Fang, who sports a disarming smile throughout our interview, is very bullish following the presentation: “The reaction everywhere to the roadshow among our customers has been very positive.”
ZTE is already gaining traction in Europe, having signed a number of significant landmark deals with groups such as France Telecom and Portugal Telecom, and Ms Fang’s presence at the roadshow indicates that the group believes this is just the beginning.
Ms Fang believes that ZTE has been demonstrating that it has a compelling proposition for the industry for a number of reasons, not least cost, which has been the foundation of the early inroads that Chinese groups have made in international markets.
“Yes, we are very competitive from a cost point of view,” she admits but insists there is more to ZTE than an ability to save customers money.
“First, we have a product portfolio that is very long range, which goes from fixed to mobile and to value added services and this also ensures that we are competitive.
“But then we also have a localisation strategy and we have been working with local employees as we want clients to feel they are talking to a local company and not a Chinese company,” she says.
Localisation also extends to working with local partners. ZTE last year signed a distribution agreement with Marconi, by which it gained access to the UK group’s SDH-based digital radio system while offering its own Coarse Wave Division Multiplexing equipment. There have been similar deals with Alcatel and Ericsson.
Ms Fang laughs when it is suggested that international rivals might do better to worry about how to stave off the potential threat presented by ZTE rather than reaching deals with it, and dismissed the notion that competitors had anything to fear from ZTE, which she says intends to be a good partner to other manufacturers. Nonetheless, Ms Fang was not prepared to rule out the possibility that ZTE would follow the acquisitive example set by Lenovo – which bought itself a position in the notebook market with IBM’s PC business.
“Merging and buying other companies could be possible for us now we have listed on the Hong Kong Stock Exchange. It is one way to develop the business,” she says.
As it has become increasingly apparent that competition from China is a growing reality across the technology world, many groups have consoled themselves with the idea that while Chinese entrants to the market are tough to beat on cost, they are not as innovative as more established rivals.
It is a charge that Fang Rong emphatically rejects – although she does so with a wry smile that suggests that this is not the first time she has done so – by drawing an analogy with Japanese dominance of the consumer electronics sector.
“I think when the Japanese companies first came to European markets with their products they were asked similar questions,” she says.
There is no need for her to point out how that ended, and so instead she points out that ZTE has 9,000 people working in research and development.
“I believe the new technology for the future of telecoms will be invented in China,” she says.
The competition has been warned.