While some trumpeted Chinese investments in Georgia have fallen flat, a Chinese mobile-phone maker has taken a different tack: starting small and quietly building its presence in Atlanta.
Maybe it’s because ZTE Group, the Shenzhen, China-based telecommunications giant, has little to prove. The Shenzhen- and Hong Kong-listed company employs 80,000 people around the world and has made its name by installing base stations, switches and other telecommunications equipment.
But in recent years the company has moved into consumer products like USB modems, mobile phones and even tablet computers running Google Inc.‘s Android operating system.
Though not well-known in the West, ZTE has become the world’s fifth largest handset maker, just behind Apple Inc., which makes the wildly popular iPhone, according to International Data Corp.‘s quarterly mobile phone tracker released in March.
Much of ZTE’s volume comes from China, which at nearly 900 million has roughly three times more cell phone users than the U.S. has people. During the first quarter 2011, ZTE controlled about 11 percent of the market in its home country, trailing only perennial giants Nokia and Samsung.
ZTE is still a small player in the U.S., manufacturing less than 1 percent of all phones shipped during the first quarter, but its ambitious plans to change that are raising the profile of its Atlanta operation.
In 2009, ZTE USA Inc., the company’s Dallas-based subsidiary, put an office on Lenox Road in Atlanta, near the Buckhead headquarters of AT&T Mobility, the communications firm’s mobile-phone unit.
Since then, ZTE’s engineers have spent long days at the AT&T offices designing new products. At least two AT&T-branded phones made by ZTE were released last year, said Ed Robinette, a mobile-phone industry veteran and a vice president in the Atlanta office.
ZTE also provides AT&T with chip modules that allow machines communicate with each other.
AT&T Mobility declined to comment for this story.
According to Mr. Robinette, the success of the AT&T partnership has led to a long-term commitment in Atlanta. ZTE recently signed a 10-year lease on about 8,800 square feet of space at 3630 Peachtree. The mixed-use development in Buckhead has 425,000 square feet of office space, retail stores and Ritz-Carlton condominiums.
Aside from a variety of monetary incentives, ZTE got another intangible benefit.
“They chose the side of the building that maybe not everyone would because it looked out at their biggest customer. When you look out of the window, you’re looking at AT&T,” said Jason Watt, an associate vice president at Grubb & Ellis, which represented ZTE in the transaction.
Mr. Watt and associate Adam Simpson first contacted the company while cold-calling Buckhead office tenants, and it was quickly evident after talking via Skype with ZTE leaders in China that they had stumbled upon a little-known giant with big plans in the U.S.
“It was kind of a home run, that nobody had heard of them, they weren’t being contacted by brokers, and all of a sudden you’ve got this international company that everyone is going to know in the next few years with what they’re doing with the cell phones,” Mr. Simpson told GlobalAtlanta.
ZTE employs 30 in Atlanta, including transient Chinese staff, but is hiring at least 10 new workers. The staff has already moved into the new offices, where a grand opening will be held June 14.
ZTE has the option of expanding the space by about 3,000 square feet in the future.
“When people are shrinking, we are adding [employees],” said Henry Zhang, a ZTE project manager who travels to China with AT&T multiple times each year.
ZTE is gradually introducing branded phones and devices in the U.S. It already has phones, 4G data cards and other devices with Sprint, Verizon and Metro PCS. Microsoft Corp. announced May 26 that ZTE would produce new Windows Phone 7 handsets.
In April, the company’s leaders projected sales of 12 million smartphones globally this year (a category that includes Android-powered tablet computers). Europe and Asia will likely account for most of that growth, though ZTE also has a strong Latin American presence.
The Android-powered ZTE Skate was unveiled in February at the GSMA Mobile Conference in Barcelona, Spain, which Mr. Robinette and others from the Atlanta office attended. The Skate is scheduled to come out later this year, though it’s unclear whether it will be released in the U.S.
Breaking into this market will be difficult. While ZTE has the technical resources to put together a cost-efficient smartphone, the key question is how much they are willing to “pony up” in marketing dollars to stand out from the field, said Ramon Llamas, an author of IDC’s quarterly mobile-phone tracker.
Samuel Sun, executive vice president for ZTE USA in Atlanta, said his company could end up going the way of HTC, the Taiwanese firm that went from virtually unknown to selling branded smartphones in the U.S. in just a few years.
But even if ZTE keeps following HTC’s trajectory – introducing carrier-branded phones and gradually moving up the value chain – the smartphone market may not be as open now to new arrivals as it was when HTC introduced its hit models, Mr. Llamas said.
With the number of mobile phones leveling out in the U.S., consumers will move toward upgrading devices, intensifying competition among smartphone providers. With carriers’ limited shelf space, ZTE will be one in a cacophony of voices vying for influence, he added.
“Smartphones are taking up a greater proportion each and every single year. It won’t be long until smartphones represent the majority of mobile phones shipped in the United States,” Mr. Llamas said.
Mr. Sun doesn’t expect the company’s Chinese origins to present any hurdles in terms of reputation or branding.
“For our industry, we don’t have such kinds of struggles because we are a global company, and we have been globalized for 15 years,” he said.
Still, ZTE has traditionally worked on the other side of the equation, providing equipment that makes networks function rather than the devices that use them.
And competition will be fierce, even from its hometown. Huawei Technologies Co., also based in Shenzhen, has said that it is also seeking to sell more smartphones around the world. The countries have sparred over patent infringement in Europe and elsewhere.