"By 2015, we expect the U.S. to be the largest market for handsets for ZTE," Lixin Cheng, president of the Chinese company's North American region, said in an interview Wednesday in Hong Kong.
Long known for making phones on a contract basis—in addition to telecom equipment—ZTE is shifting its focus to building its own brand of mobile devices, and is building market share: In the third quarter, it had 5% of the global handset market, pushing it past Apple to No. 4 by shipments, according to research firm Strategy Analytics.
In the U.S. smartphone market, where the company's share is so small it's lumped in the "other" category—trailing, among others, Apple and Taiwan-based HTC—ZTE offers a model that retails for as little as $89 in the U.S. with a carrier's subsidy.
"Next year, we're going to launch LTE and high-tier phones in the U.S.," Mr. Cheng said. LTE, for long-term evolution, is a fourth-generation wireless technology that allows faster download speeds than current 3G technology.
The company, which is listed in Shenzhen and Hong Kong, is in talks with the top four U.S. carriers about the phone, likely to be based on Google Inc.'s Android software or Microsoft Corp.'s Windows 7 platform, said the executive.
"With a similar feature set [as the iPhone], ZTE can offer an alternative," said Mr. Cheng, adding that the phones would still be "more affordable" than the iPhone, though he declined to specify price points.
The ZTE strategy contrasts with that of the top handset vendors, Nokia and Samsung, which are looking to tap into strong demand in emerging markets like Brazil and India by beefing up low-end offerings—despite razor-thin profit margins. Samsung has launched feature phones that cost as little as €25 ($33.50) in Europeand smartphones in India in the $100-to-$150 range. The Nokia 600 phone, unveiled in August, retails for $260, about half the cost of an iPhone 4.
Typically, a high-end smartphone costs more than $400. Samsung has forecast that by 2015, smartphones selling for less than $200 will represent about 50% of the market by volume.
Though the U.S. economic slowdown and the crisis in Europe are weighing on consumer demand for gadgets, the executive said ZTE is upbeat about its growth prospects in North America. Its U.S. shipments of mobile devices in the third quarter were up 157% from a year earlier, he said.
The company, is also considering building a manufacturing facility to make mobile devices in the U.S., he said, where it now has 10 offices and three research and development facilities. ZTE has 400 employees across North America.
"We have increased substantially our employees and we're constantly adding staff" in areas such as local R&D, he said. ZTE's staff levels in the U.S. increased about 30% between 2010 and 2011.
Mr. Cheng said the company sees bigger U.S. opportunities in mobile devices than telecom equipment, where security issues may make it difficult for Chinese vendors to get contracts. Sprint Nextel Corp. excluded ZTE and rival Huawei Technologies Ltd. from a contract worth billions of dollars largely because of national-security concerns in Washington, people familiar with the situation told The Wall Street Journal last year.
"We don't see near-term big opportunities in the infrastructure business," said the executive.
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