Geographical frictions continue, the COVID-19 epidemic recurs, and emergencies that have appeared frequently in recent years have broken the world’s original operating model. The same is true for commercial companies on Blue Star. The operating environment of most companies has undergone tremendous changes as a result.
If we go back to the starting point of change, the different understandings of the general trend among business companies determine the vast differences in their current situations - some have collapsed, while others have made a comeback.
For ZTE, 2018-2021 will be three years of hard climbing and low-key stealth. After the crisis in 2018, the company began to think about its future. In the same year, the company formulated a three-step strategic cycle plan of recovery, development and transcendence to promote the recovery of related businesses.
Fortunately, the technical foundation accumulated over decades is still there, coupled with the opportunities brought by policies such as the digital economy and the acceleration of 5G industrialization, many of the company's operating indicators have recovered or even exceeded the best in history, and have returned to the industry leadership. the main track.
In 2021, ZTE stands at the transition point between development and transcendence cycles. After three years of hard work, the many changes that have taken place in the company seem to be accumulating strength for the next strategic cycle.
Not just the operator business, the second curve is revitalized
After ZTE formulated a three-step strategic plan, it will "consolidate its roots and expand new ones" and "achieve quality growth" , has always been the core concept of the company's business development. However, judging from ZTE’s 2021 financial report and the statements of executives in various public occasions, ZTE is increasing its emphasis on “exploiting innovation.”
Not long ago, at the global analyst conference held by ZTE, its management mentioned that facing the next strategic cycle, the company will achieve leapfrog development through "two curves".
The so-called "two curves" mean to continue to "consolidate the foundation" and maintain the stable growth momentum of the first curve, which is dominated by the operator's network business; at the same time, increase the "expansion of new" to allow government, enterprise, and The second curve represented by terminals and innovative businesses has achieved rapid growth.
In fact, judging from ZTE’s performance this year, the advancement of each business line follows the above-mentioned ideas.
Data from the third quarter report of 2021 show that ZTE’s operator network business has maintained steady growth, and some high-value products have increased in the operator’s centralized procurement share; government, enterprise and consumer businesses have seen a lot of Star products, such as high-end servers and storage, GoldenDB distributed database, operating systems, etc.
The emergence of these star products has opened up more possibilities for ZTE’s business dimensions in markets other than operators. In the first three quarters of this year, the company's server and storage product revenue doubled year-on-year, mobile phone revenue increased by approximately 40% year-on-year, and home information terminal revenue increased by approximately 90% year-on-year, which has begun to provide a new growth pole for the company's performance.
In terms of innovative business, ZTE has seized new market development opportunities by arranging automotive electronics, enterprise digitalization and other businesses to reserve potential energy for the acceleration of the second curve.
It is understood that in terms of automotive electronics business, the company has reached strategic cooperation with China FAW, SAIC Motor and other car companies; in terms of corporate digitalization, the company has established strategic cooperation in 15 key industries such as government affairs, energy, transportation, and finance. , exporting its own digital products and technologies on more than 60 projects.
Transforming traditional manufacturing into smart manufacturing, creating highly resilient organizations under digitalization
Catalyzed by the COVID-19 epidemic, today’s global macro situation is filled with many uncertainties. In order to cope with risks that may come at any time, ZTE is also pursuing its own evolution and transformation.
At the Global Analyst Conference, ZTE’s management proposed a plan to build the company into a highly resilient organization, that is, to comprehensively improve the company’s predictive capabilities, immunity and adaptability in the face of business risk impacts. , can be discovered early, cannot be killed, recovers quickly, and can see far away.
Regarding how to build a highly resilient organization, the company’s management stated that it will firmly promote the digital transformation of the enterprise. Specifically, it is to digitally transform the company's daily production operations, external cooperation and other aspects to achieve supply chain flexibility, high compatibility and substitutability of R&D, rapid response to operations, and flexible delivery of projects.
For example, ZTE’s Nanjing Binjiang Intelligent Manufacturing Base, which was put into use this year, uses the concept of “5G to make 5G” to intelligently transform and upgrade the traditional manufacturing industry through digital means. It not only achieves the production of 5 units per minute The ultra-high production efficiency of the base station can save more than 30 million kilowatt hours of electricity every year. This project also won the first prize in the 4th "Blooming Cup" 5G Application Competition organized by the Ministry of Industry and Information Technology this year.
Currently, relying on its own digital practices, ZTE has formed a series of component-based digital products and service solutions. It is composed of cloud network base, data platform, unified collaboration portal, digital office, digital production, digital security and other sub-solutions. It can empower all areas of enterprise operations with a building-block business component library.
In September this year, ZTE made an external commitment to achieve energy conservation and emission reduction goals of peaking carbon emissions by 2030 and achieving carbon neutrality by 2060. The digital transformation of enterprises, due to its natural characteristics of energy conservation and environmental protection, has also become a prerequisite for the realization of the company's green, low-carbon and sustainable development strategy.
Not only the revenue growth, but also the improvement in profitability is even more eye-catching
The adjustment of business ideas has not only helped ZTE enhance its corporate resilience, but also brought real money.
Judging from the data of the past three years, ZTE has achieved healthy growth in both operating income and net profit attributable to the parent company. From 2018 to 2020, the company's operating income increased from 85.513 billion yuan to 101.451 billion yuan, returning to the 100 billion club; the net profit attributable to the parent company turned from -6.984 billion yuan to 4.260 billion yuan, and the results of the adjustment of business ideas have begun to show.
It is worth noting that in the first three quarters of 2021, the company achieved operating income of 83.825 billion yuan, of which operating income in a single quarter was 30.754 billion yuan, a record high in the past three years; in terms of net profit attributable to the parent company, the previous In the third quarter, it reached 5.853 billion yuan, exceeding the historical figure for the whole year.
The growth of the company's operating income and net profit attributable to the parent company is not due to simple expansion of business volume.
Since the second quarter of 2020, ZTE's single-quarter sales gross profit margin has improved for five consecutive quarters, from 28.50% to 38.00%.
The biggest bright spot is still in the third quarter of this year. From January to September, the gross sales profit margin increased by 4.7 percentage points year-on-year to 36.8%. In the third quarter, it reached 38.0%, a month-on-month increase of 1.2 percentage points. In addition, ZTE achieved a net cash flow from operating activities of 11.17 billion yuan from January to September, a year-on-year increase of 188.7%, a new high since its listing.
Behind the high-quality performance growth, there is also the company's emphasis on R&D investment. In the first three quarters of this year, ZTE's R&D investment reached 14.17 billion yuan, accounting for 16.9% of revenue. This is also the seventh consecutive year that the company's R&D investment has exceeded 10 billion.
Long-term high investment has reserved a large number of intellectual property patents for ZTE. As of the first half of this year, ZTE has more than 80,000 global patent applications and more than 40,000 global authorized patents over the years; it has applied for 4,400 chip patents and granted more than 1,950 patents. According to this year's JLL report, the value of these patented technologies alone has exceeded 45 billion yuan.
In August this year, the Ministry of Industry and Information Technology stated that it would study and release the "Implementation Plan for Building a Powerful Nation in Manufacturing Intellectual Property Rights (2021-2025)" to promote the industrialization of intellectual property rights and innovation achievements in the fields of industry and information technology. For ZTE, which holds a large number of technology patents, there is huge potential transformation value.
What changes and what remains unchanged
The development path of an excellent enterprise must be constantly adjusted to adapt to changes in the times. ZTE's development in recent years has indeed had some twists and turns, but fortunately it has made positive adjustments. Judging from the current progress of the above improvements, the company is gradually entering a healthy development cycle.
The arrival of the digital era has opened up new growth space for the traditional communications industry.
This year, topics related to new infrastructure and accelerated 5G construction have continued to be mentioned many times in various policies and meetings. As a key direction of national advancement, there is no doubt that 5G will usher in overall ecological prosperity.
Thirty-six years ago, ZTE stuck to its core business of communications, and with the corporate vision of “making communication and trust ubiquitous” and the corporate mission of “networks connecting the world, innovation leading the future”, ZTE was deeply involved in digital industrialization. field, seizing the golden 30 years of development of the communications industry.
As its CTO Wang Xiyu said recently, what remains unchanged is the original intention, but what changes is the ability. Having entered the game, ZTE has now positioned itself as a "digital economy road builder" and hopes to better embrace digitalization by 'fixing' the network, 'expanding' the cloud and 'developing' industries. era, assisting operators and various industries in society in their digital and intelligent transformation and upgrading.
Through its own practice and R&D accumulation, ZTE has now created digital transformation base products and solutions based on networks, chips, operating systems, databases, computing facilities, etc. The vigorous development of industrial digitalization has brought about a broader market space, which is both a challenge and an opportunity for ZTE, which has the capability of digital transformation.