ZTE needs to split up and rebrand

The US government has allowed ZTE to resume buying US technology and get back to business, but it cannot be business as usual, according to GlobalData, a leading data and analytics company.

The company’s latest report: ‘ZTE Is Back In Business: Now What?’ lays out specific steps that ZTE must take to regain lost ground in the critical US smartphone market, including major changes to ZTE’s corporate structure and brand.

Avi Greengart, Research Director, Consumer Platforms & Devices at GlobalData, comments: “ZTE’s smartphone business is heavily dependent on sales through US carriers. The US Commerce Department has lifted the Denial Order, but ZTE is not out of the woods yet – political pressure will continue. To stay on US carrier shelves, ZTE will have to make structural changes to ensure that carriers can deflect any political pressure from US security agencies and Congress.

“The most critical action ZTE can take is to separate its consumer device business from its network infrastructure. It may be impossible to prove that ZTE’s networking products have no security vulnerabilities, but its smartphones are based on US silicon and software platforms. ZTE Devices needs its own management team based outside of China, and for financial transparency it should be listed separately on a Western stock market. At the same time, ZTE Devices should rebrand to something without ‘ZTE’ in it — perhaps to Axon, its premium brand.”

GlobalData’s report also finds that the new ZTE Devices should seize the split and rebrand process as an opportunity to position its phones as the most secure Android smartphones for consumers. The report also provides specific recommendations for ZTE on Android versions, open source, and localized data security.

Of course, the rest of the market is not standing still, and ZTE’s troubles present an opportunity for rival smartphone vendors. Greengart notes that, “Korean vendors will try to position themselves as the safest choice for US carriers, even if nobody is accusing Chinese companies like Lenovo, TCL, Coolpad, or Xiaomi of any wrongdoing.”

Finally, Greengart warns: “As US suppliers resume sales with ZTE, they must plan for an eventual backlash from China. Chinese companies will be making major, state-sponsored investments in reducing reliance on all key US technologies.”

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