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China's ZTE aims to almost double U.S. smartphone share

ZTE smartphones Grand Memo Lite (L) and Grand S are displayed during a news conference in Taipei October 12, 2013. REUTERS/Pichi Chuang
ZTE smartphones Grand Memo Lite (L) and Grand S are displayed during a news conference in Taipei October 12, 2013. REUTERS/Pichi Chuang

By Yimou Lee

HONG KONG (Reuters) - China's ZTE Corp, the world's seventh-biggest smartphone maker, aims to almost double its U.S. market share in the next three years by ramping up spending on marketing.

ZTE, which trails cross-town peer Huawei Technologies Co Ltd in selling both smartphones and telecoms equipment, wants more share of the fat profit margins promised by sales of high-end phones in the United States.

But the company needs to first work on its image. Its mainstay telecom equipment business was essentially shut out of the U.S. and other markets after government officials flagged security concerns about Chinese-made equipment.

ZTE targets a U.S. market share of 10 percent by 2017 from 6 percent in 2013, Lv Qianhao, global marketing director of mobile devices, told Reuters at a company event on Thursday.

That would place it a distant third behind Apple Inc with 41 percent and Samsung Electronics Co Ltd with 26 percent, according to September-November data from researcher comScore.

To that end, ZTE will increase its U.S. marketing budget by at least 120 percent this year from last, Lv said without elaborating. Like other Chinese handset makers, ZTE is grappling with low brand awareness in the world's second-largest smartphone market and perceptions of inferior quality.

Samsung Electronics, which earns around two-thirds of its operating profit from its mobile division, spent $597 million on marketing in the United States in 2012, according to researcher AdAge.

Last year, ZTE signed a deal with the Houston Rockets basketball team and released a Rockets-branded phone.

"We want young U.S. consumers to participate in our marketing activities, so we will have more NBA (National Basketball Association) stores and channels that sell our products," Lv said.

Globally, ZTE aims to ship around 60 million smartphones this year compared with about 40 million smartphones last year, said Senior Vice President Zhang Renjun.

The company sees much of that growth in developed markets - including Russia and China - which accounted for 68 percent of mobile device revenue last year compared with 35 percent in 2007, said Lv.

ZTE's mobile device business sells feature phones as well as smartphones. It was the fifth-biggest mobile phone vendor in July-September, according to researcher Gartner, though it fell out of the top five smartphone sellers list in the same period.

ZTE expects to have swung to a profit for last year having booked its first-ever loss as a public company in 2012.

It based its turnaround on cutting costs, signing fewer low-margin contracts, and winning contracts to build fourth generation telecommunication networks.

The company expects global investment in 4G to reach $100 billion this year, Zhang said.

"We see more business opportunities after the (Edward) Snowden incident, as there's an increasing worry about the security of U.S. products and more people will use Chinese products," Zhang said, referring to a U.S. National Security Agency contractor who disclosed documents detailing U.S. surveillance of telephone and Internet data.

(Additional reporting by Chyen Yee Lee in SINGAPORE and Paul Carsten in BEIJING; Editing by Christopher Cushing)

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