Continuously Strengthening Investment in 5G R&D

27 August 2019, Shenzhen, China -- ZTE Corporation (0763.HK / 000063.SZ), a major international provider of telecommunications, enterprise and consumer technology solutions for the Mobile Internet, today released the interim report 2019 and the preliminary results announcement for the nine months ended 30 September 2019.

According to the report, for the six months ended 30 June 2019, ZTE reported operating revenue of RMB 44.61 billion, representing an increase of 13.1% compared with the same period last year, and net profit attributable to holders of ordinary shares of the listed company amounted to RMB1.47 billion, representing an increase of 118.8%, compared with the same period last year. Basic earnings per share was RMB 0.35. It was estimated that net profit attributable to holders of ordinary shares of the listed company will be from RMB 3.8 billion to RMB 4.6 billion for the nine months ended 30 September 2019.

The research and development costs for the six months ended 30 June 2019 amounted to RMB 6.47 billion, accounting for 14.5% of the operating revenue, with the percentage being increased by 1.7 percentage points, compared to 12.8% for the same period last year.

Committed to building its core competitiveness in independent innovation in the 5G era, ZTE has been focusing on basic operating systems, distributed databases, core chipsets and other fields. The new-generation 5G wireless system chipsets and transport switching network chipset have entered the stage of product introduction. The company has completed the design and mass production of the 7nm chipsets, and embarked on the R&D of the 5nm chipsets. Meanwhile, ZTE will collaborate closely with partners on the R&D of new technologies to accelerate the chipset R&D progress in the fields of leading process techniques, advanced packaging, core IP, new material applications and etc.

The company’s self-developed operating system has been applied in various key industries, including telecommunications, high-speed rail, electricity, industry and automotive.

With regard to distributed database, ZTE’s financial-class distributed database GoldenDB has more than 100 patent applications. It is the only product that passed the certification of the China Academy of Information and Communications Technology, with all the 50 tests earning full score.

In the field of innovative talents, ZTE has strengthened the introduction of high-end innovative talents and improved the talent training mechanism. In the second half of 2019, ZTE has been collaborating with universities across China to recruit over 5000 5G innovative talents, further enhancing the company's innovative capability. By June 30, 2019, ZTE had applied more than 74,000 patents with over 36,000 global patents granted and over 3,700 5G patents. ZTE is a major participant and contributor to global 5G technology research and standard development. As of June 15, ZTE had declared 1,424 families of 5G Standard Essential Patents(SEP) to ETSI, ranking top 3 in the world, based on IPlytics’s statistic.

In the field of cybersecurity, ZTE is committed to providing customers with end-to-end security assurance for products and services. Three cybersecurity laboratories have been set up in Nanjing, Rome and Brussels to provide customers and regulators with transparent security verification.

Adhering to the proactive and steady operation strategy, ZTE has expanded new growth opportunities at crucial period of 5G development, and actively participated in operators’ network construction and technological evolution. By means of long-term technological accumulation and core product competitiveness, ZTE has seized the opportunity for 5G technological revolution to achieve high-quality growth. In the first half of the year, the company has signed 25 5G commercial contracts worldwide, covering China, Europe, Asia-Pacific, Middle East, and other major 5G markets. Moreover, ZTE has cooperated with more than 60 operators worldwide and been fully involved in the large-scale 5G network deployments in China.

During the reporting period, ZTE has constantly focused on the main channel of operators, further strengthening its core competitiveness in 5G wireless, core network, transport, chipsets and other technologies. In the field of wireless products, ZTE’s 5G end-to-end commercial products and solutions as well as the full series of NR products have achieved all-band, all-scenario coverage. Moreover, ZTE has five years of commercial practice experience in Massive MIMO, one of the key 5G technologies. ZTE’s 5G NSA&SA dual-mode base stations fully support the flexible selection and the smooth evolution of operators’ network architecture. Furthermore, its Common Core realizes 2/3/4/5G/fixed full access and full integration while supporting both SA and NSA, saving 40% of the investment for the operators. ZTE’s 5G slicing wholesale solution won Leading Contribution to Network Slicing Award at 5G World Summit in London. In addition, the company’s self-developed AI Engine is capable of supporting 5G intelligence in all scenarios. Serving more than 160 commercial LTE/EPC networks worldwide, ZTE’s cumulative 4G base station shipments account for close to 20% global market shares. Moreover, ZTE has more than 450 NFV commercial cases and PoC cases worldwide, and ZTE ranks among the Tier-1 Camp in terms of comprehensive NB-IoT technical competitiveness.

In the Wireline Networks, ZTE’s 5G transport end-to-end products have completed more than 30 commercial trials and existing network tests. ZTE’s three-in-one chipset has achieved the lowest latency in the industry. Moreover, ZTE’s beyond 100G OTN takes the lead in terms of network performance while its 200G OTN has been commercialized on a large scale, and its single-carrier 400G OTN has set a new record of the furthest transmission distance. As ZTE’s flagship optical access platform, TITAN records the industry’s top 1 in terms of capacity and integration. It innovatively features a built-in MEC to integrate the edge cloud with the access network, helping Zhejiang Branch of China Mobile save upstream bandwidth by up to 60 percent, thereby improving users’ viewing experience. The total capacity of ZTE’s big video system has exceeded 100 million lines while ZTE’s 5G live TV solution is applied in many major sporting events in China.

In the field of consumer business, ZTE has been in cooperation with more than 20 operators worldwide in 5G terminal arena and developed serialized and diversified 5G terminal product lines. In the first half of 2019, ZTE Axon 10 Pro 5G was launched in various countries. It is sold in China, Finland and the United Arab Emirates as the first commercial 5G samrtphone in China, North Europe and the Middle East. Moreover, ZTE 5G Indoor Router MC801 has been granted Network Access License by Ministry of Industry and Information Technology and this product has been put into commercial use in Chinese market in August.

In the first half of 2019, ZTE has formed over 30 5G serialized solutions and implemented more than 50 demonstration projects in nearly 20 industries, including industrial Internet, big video, Internet of Vehicles, media, energy, public safety, health care, education, environmental protection and transportation. In strategic cooperation with more than 300 industry customers, ZTE has jointly deployed service applications with them and collaborated with over 200 industry-leading product providers to launch 5G-based solutions oriented to different industries.

Moving forward, ZTE will further integrate internal and external resources, focusing on mainstream markets and products to continuously improve customer satisfaction and market shares. ZTE will also gather first-class talents, strengthen compliance and internal control to constantly improve internal governance of the company. Moreover, the company will adhere to innovation in core technologies and focus on 5G end-to-end deployments, so as to maintain the sustainable development of innovative strength and achieve quality growth at the peak of 5G investment and construction.