ZTE, China’s second-largest telecom equipment maker will build an industrial park in Hortolândia, close to São Paulo.

Although ZTE, a state-controlled company listed in Hong Kong, refuses to put a figure on its planned total investment, sources familiar with the situation put it at several hundred million US dollars.

“Our plant will serve as ZTE’s base for Latin America and will employ more than 2,000 people,” says Eliandro Avila, chief executive of ZTE Brazil.

So far, ZTE has only got a sales force on the ground, and has some local contract manufacturing done by Evadin, a Brazilian company.

However, “Brazil represents 50 per cent of the South American market,” says Mr Avila.

ZTE is one of the world’s leading makers of telecom infrastructure gear and devices such as handsets and data cards. Last year, its turnover was Rmb70.3bn ($10.8bn).

Analysts emphasise that despite the distances involved, manufacturing in China for the South American market would still be more cost-effective for most technology products. However, Brazil’s high import tariffs are starting to force Chinese companies to expand in the country.

“Basically, our products cost an average 70 per cent more when imported,” says Mr Avila. He adds that the main advantages of setting up shop locally include incentives provided by the government which allow the company to avoid high import taxes.

Construction of ZTE’s facility is well under way, and the company plans to have the first part of the factory, which will focus on handsets, ready to start production within six months.

A second phase is planned to become operational in late 2012 or early 2013. That part will produce network infrastructure gear such as routers.

Apart from production, ZTE’s industrial park will also include research and development. Some 200 of the Brazil-based employees are to work in a new R&D centre, one of 15 worldwide, with a total headcount of 30,000.

For the time being, ZTE’s Brazilian operations are likely to rely heavily on Chinese staff. Twenty per cent of the 2,000 are expected to come from Shenzhen, the company’s headquarters in southern China.

ZTE also intends to continue its co-operation with Evadin, its contract manufacturing partner, for certain devices even as its own factory begins operations.

Strong demand is driving the expansion in Brazil. This year, the company said its standing in the country had been raised considerably, following a “significant sales boost” driven by large-scale contracts for wave-length-division multiplexing, a technology that combines different carrier signals on to one optical fibre.

Last year, the company launched a low-cost cell phone with digital television through Vivo, the Brazilian operator, in the Latin-American market.

Therefore, ZTE has big ambitions. “Our goal is to be among the top three companies in terms of networks and terminals,” says Mr Avila.

Worldwide, ZTE ranks fifth among network infrastructure vendors behind Ericsson of Sweden, its Chinese peer Huawei, Nokia-Siemens Networks, and Cisco. It is also one of the world’s top five handset vendors.

Like Huawei before, it has been outgrowing some of its western rivals such as Nortel and Alcatel-Lucent and steadily rising through the global industry’s ranks.

If ZTE’s ambitious Brazilian plans work out, there might be space for other manufacturers to follow.

Although the Chinese company says its own factory will be the only one in its facility for now, it is setting up an entire industrial park.

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