ZTE has squeezed out Huawei, which was a leader in the server, core backbone network and storage solutions markets. In its annual report, ZTE reported a growing share of these segments. Traditionally, Huawei has played a leading role here, but at the end of 2021, ZTE’s revenue as a percentage grew within and outside of the PRC at double-digit rates.
Although ZTE still does not have a truly significant share of the global server market unlike its Chinese brethren Inspur, Huawei and Lenovo, the company has already reported that its revenue from server and storage solutions doubled in the first three quarters of 2021 compared to the same period the previous year. The company emphasized that its servers have the largest share in the business of China Mobile, China’s largest mobile operator, for the third year in a row. Such activity poses a direct threat to Huawei, which is still experiencing problems with access to some key components due to U.S. sanctions.
Huawei’s server revenues fell 44% in the third quarter of 2021 alone, which competitors like Inspur, Lenovo, H3C and ZTE immediately took advantage of – they all report revenue growth in the PRC in the corresponding period.
In addition, ZTE quietly began building 5G base stations based on the 7nm process. The company used Taiwanese TSMC’s production facilities to create the chips. The inability for Huawei to do business with TSMC due to the sanctions imposed by the U.S. has played into ZTE’s hands. Now ZTE expects noticeable growth in the market of base station solutions, and is also interested in one of the most advanced TSMC 5 nm processors.
But while ZTE is not subject to sanctions banning the use of TSMC’s latest technology, it is still unable to sell its base stations to many Western companies due to U.S. restrictions. This has led the company to focus its efforts primarily on China. According to sources, ZTE is quite aggressively increasing chip production and, although the volumes are still small, there has already been impressive progress.