China’s No. 1 smartphone maker ZTE Corp. said it will target the Korean niche-market of smartphones, calling its Korean operation a screen-test for the global war against Korean tech titans such as Samsung and LG.

Currently the Chinese handset firm targets the low-cost, third-generation device sector of the Korean smartphone market.

In contrast to public opinion that Korea has completely switched over to Long Term Evolution devices, about 10 percent of customers in Korea are still willing to purchase low-cost, third-generation mobile devices, ZTE said. 

These customers include people who lost their smartphones far before their contract expiration date, those who do not need high-tech smartphones, and foreign customers who want inexpensive pre-paid phones.

The world’s fourth-largest producer of mobile phones and fifth in telecommunication equipment, ZTE had its debut on Korean online store G-market with a third-generation smartphone model called “Z Phone” on Nov. 6.

Now Z Phone has become one of G-market’s steady-selling items. G-market, run by eBay Korea, said that 100 Z Phones sold out in just two and half hours during its limited-time offer promotion event.

Out of about 1,000 Z Phones that have been sold through G-market so far, only a few dozen were returned, ZTE and G-market said.

“We have seen excellent companies like HTC and Nokia knocked down in Korea. But we are taking a different approach,” said ZTE Korea managing director Cho Yu-suk.

Z Phone’s core strength is the low price, sometimes only a quarter of that for some Korean smartphones.

While new smartphone models are priced at around 1 million won ($920) generally, Z Phone costs less than half that at about 400,000 won. In special promotion events in e-shopping malls, the price is cut even further to as low as about 200,000 won.

In ZTE’s view, the demand is much smaller in Korea compared to big markets like China and Western countries, he said.

“When we launch a new device in China, we instantly sell about 3 million to 4 million units, but here we only sell 100,000 to 200,000 in the same period.”

“But we see Korea as a strategically significant market because we will be competing against excellent Korean products in the future. It is sort of a screen test,” he said.

ZTE has been observing the market while leveraging its level of customer services and call center services since the launching of Z Phone.

In the first half of 2013, the Chinese handset maker plans to launch a premium global version of its third-generation quad-core models. The company added that it may bring in some of its global-design LTE smartphones in the second half as well.

“Frankly speaking, these global-design quad-core models are not exactly localized to Korean trend. They are designed and manufactured in Taiwan, and we will bring part of these products to the Korean market.”

ZTE currently takes on “no-brand” marketing, determined to spend almost zero expense in brand promotion.

Fearing that ZTE will be permanently stuck with the low-price image, the company prefers to have Z Phone known to the public as “G-market phones” or “Home plus phones” rather than ZTE phones.

“The low-cost policy is only for the start,” Cho said.

“Instead, ZTE is investing more in the research and development sector and enhancing the quality (of our product).”

By Chung Joo-won (joowonc@heraldcorp.com)