ZTE is not selling its phone business because phones stopped working in China. It is selling the phone business because the AI phone is the only part of ZTE's consumer arm worth an internet giant's money, and ZTE's own accounts show it already started the transfer months before anyone reported a deal.

The story broke on the evening of 3 November. IT之家 relayed a report from 雷峰网 (Leiphone) that ZTE is in talks with an internet giant to package its consumer phone business into a joint venture with ZTE, that giant and Shanghai state capital. The internet side is putting in around ¥8 billion. ZTE wants the business valued at roughly ¥40 billion. Talks started in April, restarted in July, and the structure was settled in September, with an announcement originally planned for late October that has slipped.

None of that is confirmed. There is no HKEX announcement, nothing on ZTE's investor-relations page, and no comment from the company as of this evening. The entire deal is sourced to one unnamed employee quoted by one outlet. ZTE's H1 2026 interim report explicitly states that the group made no material disposal of equity in subsidiaries in the first half.

The filings are the interesting part, because they show the packaging happening whether or not the sale does.

What ZTE's own accounts show

In the parent-company (not consolidated) statements, ZTE's direct holding in 努比亚技術有限公司 (nubia) went from ¥1,124,402,000 at the start of H1 2026 to zero at 30 June. At the same time, ZTE's investment in 上海申啟紀元智能終端有限責任公司 — Shanghai Shenqi Jiyuan Intelligent Terminal Co — went from ¥172,000,000 to ¥927,000,000, and 智輝互聯有限公司 from ¥18,300,000 to ¥407,903,000. The parent company's investment income line shows a ¥409,356,000 loss on disposal of long-term equity investments, against a ¥2,829,000 gain a year earlier.

Both entities are new. ZTE's 2025 annual report lists Shenqi Jiyuan as newly established in April 2025 and 智輝互聯 in October 2025, both consolidated into the group. ZTE's interim report states plainly: the group made no material equity disposal in the first half. So this was an internal reshuffle — the parent's direct nubia stake came off the parent's books while two subsidiaries ZTE already owned absorbed ¥1.14bn more — not a sale to a third party.

Read one way, that is the housekeeping you do before you sell: build the entity, move the people, transfer the assets, then sign. ZTE discloses no reason for any of it.

ZTE, H1 2026
Revenue ¥78.03bn, +9.05% YoY
Net profit attributable ¥2.75bn, −45.57% YoY
Consumer segment revenue ¥18.63bn, 23.88% of total, +8.09%
Consumer segment gross margin 18.35%, +0.57pp
Carriers' networks revenue ¥31.77bn, 40.71% of total, −9.41%
Enterprise revenue ¥27.63bn, 35.41% of total, +43.51%
International revenue ¥27.87bn, +33.13%, 35.72% of total
Parent's direct nubia stake ¥1.12bn → zero
Parent's Shenqi Jiyuan stake ¥172m → ¥927m
Parent's Zhihui Huli stake ¥18.3m → ¥407.9m
Parent's loss on equity disposals ¥409.4m

The headline consumer number is not the point. ZTE's consumer segment is mostly not phones: the 2025 report breaks it into home terminals, phones and mobile internet products, and cloud PCs, and ZTE says its 5G FWA and MBB market share has been world number one for five straight years. Cloud PC terminals passed two million units in 2025. The phone business is the piece with no obvious moat inside it.

The part that is worth ¥40 billion

The reason the phone business has any value at all is the assistant running on it. ZTE has been building the Doubao phone with ByteDance: the 努比亚 NaviX Ultra launched in September at ¥5,999 to ¥7,499, with a national subsidy price starting at ¥5,499, and ZTE markets it as the world's first AI agent phone with Doubao built into the OS. ByteDance's own assistant sits at the system level, and ZTE has publicly said it is deepening the partnership.

Sales have been tiny but the reaction has not been. The first 30,000 Doubao phones sold out with second-hand premiums reportedly above 50%. ZTE's chairman 方榕 has said the company has its own in-house assistant coming. And on 30 March, at its results briefing, ZTE said outright it was working with ByteDance and other ecosystem partners on the next generation of Doubao AI phones.

Which is why the unnamed internet giant is most likely ByteDance. The report does not name it. ZTE's filings do not name it. But ZTE's public statements name ByteDance as its AI phone partner, and an internet company that wants a hardware channel for its assistant does not need to buy a handset maker — it needs a handset maker it can put a JV around.

Read that way, the ¥8 billion cheque against a ¥40 billion valuation stops looking like a bargain and starts looking like a down payment on something that includes the Doubao channel.

What is not being sold

RedMagic stays with ZTE. The report is explicit: the gaming phone business is not in the package. Nor are the routers and home terminals from the old phone division, which may go back to the group. That means the JV gets the mainstream consumer phone business, domestic and overseas, and keeps its hands off the one product line with a real fan base and a real price ladder — the RedMagic 12 Pro+ that launched in October at ¥6,999 to ¥8,999, ¥6,499 with subsidy.

It also means the AI phone and the gaming phone go in opposite directions. RedMagic is a hardware business with a cooling gimmick. The Doubao phone is an assistant with a chassis. ZTE keeps the first and sells the second.

What this means for buyers

If you own a ZTE phone today, nothing changes. No product line is being discontinued in the report, and the JV has not been signed. If you were planning to buy a nubia or RedMagic handset, do not wait for this. The scope, the date and the price are all unsettled, and the packaging reportedly excludes RedMagic entirely.

The bigger signal is about the rest of China's phone industry, which is already rearranging itself under the same pressure. Oppo told 证券时报 in July that realme would stop updating products in China, keeping the brand for overseas and leaving One Plus alone at home. Meizu suspended new domestic phone launches in February and is pivoting to AI glasses and PANDAER. Black Shark posted in October that it is "working hard to come back alive." ZTE's own consumer revenue grew 8% while its profit fell 45.6%.

The market is down. ZTE's A-shares closed at ¥27.65 on 3 November, down 26.1% year to date, against a December closing high of ¥45.09 and an October closing low of ¥26.81. The H-shares fell 1.02% to HK$19.41. Since the story broke after the close on 3 November, there is no market reaction to read yet. ZTE's A-share market capitalisation is ¥132.3bn, so the ¥40 billion being discussed for the phone business is roughly 30% of the whole company.

Storage prices are the reason any of this is happening. TrendForce expects conventional DRAM contract prices up 10% to 15% quarter on quarter in Q4 2026 and NAND up 15% to 20%. IDC counted 58.06 million smartphones shipped in China in Q3, down 15.2% year on year. A handset maker with a commodity phone line and thin margins is a bad business in that market. A handset maker with a system-level AI assistant that a large internet company wants to distribute is a different asset.

ZTE did not say any of this. It filed numbers.

Sources