At US$1.9 billion, telecom giant spent 12.2% of total revenue in R&D which is second highest in China

9 November 2016, Hong Kong – ZTE Corporation (0763.HK / 000063.SZ), a major international provider of telecommunications, enterprise and consumer technology solutions for the Mobile Internet, today announced that the company has been named as one of the world’s top 70 highest research and development (R&D) spenders.

The 2016 Global Innovation 1000 Study, recently published by Strategy&, the strategy consulting team at PriceWaterhouseCoopers LLP (PWC), has revealed that the investment ratio in R&D spend by China’s companies was the highest in the world during the period covered by the report. Among the top 10 R&D spenders in China (see table below), those in telecommunications and electronics, software and the Internet accounted for half of the total R&D spend of the top 10. In particular, ZTE, as well as Alibaba, surged past PetroChina for the first time to claim the top two spots (PetroChina had been the top R&D spender among China’s listed companies for 11 years). ZTE, having invested US$1.9 billion in R&D in 2016 - a 12.2% of its total revenue - was ranked amongst the top 70 highest R&D spenders in the world.

The report identifies the top 1000 listed companies in the world that spent the most in R&D in the last financial year (up to June 30). Among them, 130 are from China (compared to123 last year) and have spent a total of US$46.8 billion in R&D.

“In 2016, an 18.6% increase in total R&D investment by China companies was the highest in the world, vis-a-vis an 8% increase in North America as well as the downward trends in Europe and Japan,” said Adam Xu Jin, a Partner at Strategy&’s Greater China Digital Strategy Consulting team. “Innovation has become part of the national development strategy in China.  China’s companies have been increasing their investments in R&D year after year. This trend shows that Chinese companies are moving from being cost-competitive to being technologically innovative and that they strive to be globally competitive through technological superiority.”

ZTE has been channelling 10% of its total revenue into R&D over recent years. R&D investments in the past six years were in excess of RMB 50 billion. The company’s allocation for R&D has gone up even further in the past two years, to 12.2 billion in 2015, the highest among China’s listed companies. In addition, an investment of RMB 7.059 billion that was injected into R&D in the first half of 2016 was equivalent to 15% of ZTE’s total revenue, the highest proportion yet in the company’s history.

The high R&D spend has given Chinese companies a stronger say in the global telecommunications industry and put them in a leadership position. In the past two years, ZTE continued to increase investments in new technologies such as 5G/4G, chips, cloud computing and the Internet of Things (IoT). The company has been among the top three in China for six consecutive years in terms of international patents applications; it has had the highest number of applications in the Patent Cooperation Treaty (PCT) for two consecutive years; the highest number of patents in chips in China; the third highest number of patents in IoT and is one of the global top 50 in wireless charging patents. In 5G, ZTE has made a number of technological breakthroughs including the commercial adoption in China and Japan of the world’s first Pre5G Massive multiple input, multiple output (MIMO) base station as well as winning the Best Mobile Technology Breakthrough Award and the Outstanding Overall Mobile Technology-The CTO’s Choice 2016 from the GSMA.

Furthermore, Chinese conglomerates are redefining the future landscape of telecommunications and are taking the lead in being the voice for the next industry revolution. In 2015, ZTE released its strategic white paper, M-ICT: The Internet of Everything, to clearly outline the industry’s major trends. This year, it is following up with a white paper titled, M-ICT 2.0: VOICE of the Future, which will define the company’s strategic directions for the next five years centred around Virtuality, Openness, Intelligence, Cloudification, and the Internet of Everything - encapsulated by the acronym, VOICE. Leveraging multimedia chips, databases and virtual reality/augmented reality/artificial intelligence (VR/AR/AI) as strategic pillars, ZTE’s pioneering technologies are applied in four main areas, the Internet of Vehicles, industry Internet, smart home and smart city.

Moving forward, ZTE will continue to expand the breadth and depth of its business around VOICE to frame the future positioning of the company.

Top 10 R&D spenders in Mainland China and Hong Kong Region*:

*Listed Companies