ZTE, China’s second largest telecommunications equipment maker, expects net profit of between RMB 1.2 billion (around $178 million) and RMB 1.8 billion in the first half of this year, according to a statement filed to the Hong Kong and Shenzhen stock exchanges on Monday.
The company recorded losses of RMB 7.8 billion in the same period last year, which the company attributed in the statement to the $1 billion fine it paid for evading US sanctions by selling telecom equipment to Iran and North Korea. The US government then banned US companies from selling components to ZTE for seven years, which brought the company to a standstill because of its dependence on American-made parts.
In its quarterly earnings report filed to the two exchanges, ZTE said its first-quarter revenue was RMB 22.2 billion, down 19.3% year on year. Its net profit in the first quarter was RMB 862 million, a 115.95% increase from the same period a year earlier.
ZTE said it would continue focusing on its carrier business and is prepared for 5G commercialization.
The company spent RMB 3.1 billion on research and development in the first quarter, accounting for 23.2% of its total expenditures, according to the statement.
ZTE also plans to raise up to RMB 13 billion on mainland China’s A-share market to develop 5G technologies and related products, it said.
ZTE has been a primary player in formulating global 5G standards, and a major contributor to 5G technology development, Xu Ziyang, president of ZTE’s Telecom Cloud and Core Network product line, said in a shareholder meeting last month. ZTE owns more than 3,000 5G-related patents as of end-March, which brought the company into the “the first echelon” of 5G patents, Xu added.
The company will build three 5G labs in China, Belgium, and Italy this year in an effort to reassure government agencies and telecom network operators about the integrity and security of its 5G equipment.