Summary of Key Points
ZTE Communications is attempting to break through in the marginalized domestic smartphone market through two approaches: reorganizing its business divisions and developing AI-powered smartphones. On one hand, the ZTE main brand is returning to its core business of producing customized phones for telecom operators, with the Nubia brand taking over the DouBao smartphone division and focusing on AI-powered devices. The RedMagic gaming phone has also been integrated into the Nubia portfolio. On the other hand, ZTE has partnered with ByteDance to launch the world's first mass-produced AI-powered smartphone, aiming to differentiate its products through their ability to automatically execute tasks across different applications, thereby challenging the dominance of leading manufacturers. However, they face significant challenges related to the control over permissions within ecosystems like WeChat and Taobao.
The Current Division of ZTE's Smartphone Business: Each Brand Finding Its Place
This time, ZTE is not just launching new products; it is redefining the roles of its various smartphone brands:
- ZTE Main Brand: Focusing on collaborating with telecom operators to produce customized phones, such as the "ZTE ChangXing" for China Mobile and "ZTE YuanHang" for China Unicom, leveraging operator channels to consolidate its market position (given that ZTE was once part of the "China Cool联" alliance and benefited from operator subsidies).
- Nubia Brand: Responsible for domestic DouBao AI smartphones, targeting online sales channels. Nubia also operates in overseas markets, including the RedMagic gaming phone, which falls under its umbrella. Nubia is geared towards younger consumers and has a lighter brand burden, making it suitable for experimenting with new technologies like AI.
- RedMagic: No longer operating as a standalone brand but now integrated into the Nubia system, continuing to produce gaming phones while sharing channels and resources with Nubia.
Why this division? Because ZTE is considered an "other" player in the domestic market compared to Huawei, Xiaomi, and OPPO/Vivo. It cannot compete head-to-head on hardware specifications or offline sales channels. By clarifying the roles of each brand, ZTE aims to avoid internal conflicts and concentrate its efforts on the AI segment.
How Are AI-Powered Smartphones Different from Ordinary Ones?
Ordinary AI smartphones (such as Xiaomi's and Huawei's AI assistants) typically offer limited functions like voice assistance or image editing. However, ZTE's new AI-powered smartphone can automatically execute tasks across multiple applications. For example, you could ask it to book a train ticket for tomorrow and find a nearby hotel, and it would handle the entire process without needing you to switch apps manually. Another example is downloading travel photos from your album to Baidu Cloud Disk.
The difference between this and ordinary AI assistants is that while assistants follow your instructions step by step, the AI-powered smartphone can determine the best approach and complete tasks across different apps, essentially acting as a "fully automated personal assistant."
Why Is ZTE Betting on AI-Powered Smartphones?
ZTE's situation is challenging:
- It once thrived thanks to operator subsidies but lost its advantage in the 4G era due to Xiaomi's internet-based model and OPPO/Vivo's strong offline presence.
- Sanctions in 2018 disrupted its supply chain, significantly impacting overseas sales, which dropped from a peak of 60 million units to just over 10 million units.
- In the domestic market, its hardware (chips, cameras) and innovations (folding screens) are outperformed by leading manufacturers, making it hard for ZTE to stand out with conventional smartphones.
AI-powered smartphones represent a new opportunity. No manufacturer has yet released a mass-produced model that can truly execute tasks across apps. By collaborating with ByteDance, ZTE combines ByteDance's large-scale AI models with its own hardware capabilities to claim the title of "world's first" such device. Even if sales don't soar, this could help ZTE regain attention and move out of the "others" category.
The Win-Win Situation for Both ByteDance and ZTE
Why would ByteDance cooperate with ZTE? Because it has faced difficulties in hardware development:
- Previous attempts at acquiring Hammer phones, producing educational lighting products, and Pico VR devices were either unsuccessful or only moderately successful, resulting in losses.
- Although the DouBao app has millions of daily users, as a third-party app, it has limited permissions (e.g., it cannot directly access WeChat for messaging or integrate data across apps). To achieve true AI functionality, ByteDance needs deeper access to smartphone systems and hardware.
ZTE, with its experience in manufacturing and a mature supply chain, provides the necessary hardware, while ByteDance offers its AI technology and user base. This partnership allows both parties to complement each other's weaknesses.
The Biggest Hurdle: Will Giants Like WeChat and Taobao Cooperate?
The key challenge is that AI-powered smartphones' ability to execute tasks across apps threatens the dominance of these super-apps. For instance, WeChat doesn't want its chat and payment functions to be used by third-party apps (fearing a loss of traffic), and Taobao and Meituan are reluctant to share their product data and order systems.
The Nubia M153 encountered this issue during preliminary tests, as many apps refused to allow data access. ZTE's promotion may aim to shift attention away from these concerns by emphasizing that the smartphone is developed by ZTE rather than ByteDance. However, whether these barriers can be overcome remains uncertain—whether WeChat will grant necessary permissions is crucial for the success of this product.
In summary, ZTE and ByteDance's AI-powered smartphone is a risky venture. If successful, it could give ZTE a competitive edge in the AI smartphone market; otherwise, it might just become another concept phone. But given the current circumstances, this is the most feasible path forward for ZTE to break through.