ZTE : 2022 Annual Report

Important

• 1. The Board of Directors, Supervisory Committee and the Directors, Supervisors and senior management of the Company confirm that the contents of this report are true, accurate and complete without any false information, misleading statements or material omissions, and collectively and individually accept legal responsibility therefor.

• 2. This report has been considered and approved at the Tenth Meeting of the Ninth Session of the Board of Directors of the Company held on 10 March 2023. All Directors have attended the meeting in person.

• 3. Mr. Li Zixue, Chairman of the Company, Ms. Li Ying, Chief Financial Officer of the Company and Mr. Xu Jianrui, Head of Finance Division of the Company, hereby declare that they warrant the truthfulness, accuracy and completeness of the financial reports contained in this report.

• 4. The annual financial reports of the Group for 2022 have been audited by Ernst & Young Hua Ming LLP, which has issued an unqualified auditor's report in connection therewith.

• 5. The Company's proposal for profit distribution for 2022 is as follows: distribution of RMB4 in cash (before tax) for every 10 shares to all shareholders based on the total share capital as at the record date for profit distribution and dividend payment. The aforesaid matter is subject to consideration and approval at the general meeting.

• 6. This report contains forward-looking statements in relation to subjects such as future plans and development strategies, which do not constitute any specific undertakings to investors by the Company. Investors are asked to beware of investment risks and their attention is drawn to the description of the potential risks inherent in the operations of the Company set out in the section headed "3.3.2 Risk exposures" in this report.

• 7. All monetary amounts set out in this report are amounts in RMB unless otherwise specified.

• 8. This report has been prepared in Chinese and English, respectively. In case of any ambiguity in meaning, the Chinese version shall prevail.

Contents

2

Definitions

3

Glossary

8

Chairman's Statement

11

Corporate Information

13

Highlights of Accounting Data and Financial Indicators

16

Report of the Board of Directors

50

Corporate Governance Report

95

Environmental and Social Responsibility

99

Material Matters

114

Changes in Shareholdings and Information of Shareholders

120

Debt Financing Instruments of Non-financial Enterprises

123

Financial Reports

264

Documents Available for Inspection

Definitions

In this report, unless the context otherwise requires, the following terms shall have the meanings set out below. Certain other terms are explained in the section headed "Glossary".

Glossary

This glossary contains definitions of certain technical terms used in this report as they relate to the Group. Some of these definitions may not correspond to standard industry definitions or usage.

Heterogeneous computing

A technology that allocates processing to accelerated hardware to reduce the burden of the Central Processing Unit (CPU), replacing software algorithm with hardware modules to achieve performance enhancement and cost optimisation. A computing structure that employs hardware acceleration is called heterogeneous computing.

Distributed database A logically coherent database formed by the interconnection of multiple data storage units located in different physical locations using a high-speed computer network, so as to enable larger storage capacity and higher volume of simultaneous visits.

TPS

Transactions Per Second handled by the server.

UBR product

Ultra Broadband Radio, the most complete dual-band/tri-band UBR series products in the industry launched by ZTE catered to integrated multiple frequencies and multiple modes of wireless mobile networks, with one base station simultaneously supporting work over multiple frequency bands and supporting coverage of multiple modes including GSM/UMTS/LTE/NR.

AAU

Active Antenna Unit, the principal equipment at a 5G base station mainly responsible for receiving and transmitting 5G radio frequency signals.

AI

Artificial Intelligence, the use of machine to aid or replace human in doing certain tasks by simulating the sight, hearing, senses and thinking of human.

PowerPilot Definitive network

ZTE's 5G green energy efficiency solution.

A network with large bandwidth, low latency, low jitters and definitive capability created with the use of network resources, which is capable of providing definitive service experience in response to different industry requirements.

TSN

Time Sensitive Networking, as defined by the Institute of Electrical and Electronics Engineers Association (IEEE), is a solution for the provision of definitive service based on standard ethernet technology which facilitates the completion of data packet transmission within a definite time latency to meet the rigid transmission requirements of the industrial sector.

uRLLC

Ultra-Reliable Low-Latency Communications is one of the three major application scenarios of 5G, supporting services that are highly sensitive to time latency and stability and protected through network chip technology. Examples include applications which are extremely sensitive to time latency, such as the Internet of Vehicles, remote controls in smart factory and remote operation in smart medicine.

RIS

Reconfigurable Intelligent Surface, adjustment of signal phases passing through the RIS through reflective components constructed with ultra-materials so as to align/setoff signal phases on the other receiving ends of other links, in order to strengthen useful signals and weaken harmful ones.

Beamforming

Signal processing technology using sensor arrays to facilitate designated transmission and reception of signals.

Intrinsic safety base station

Mine intrinsic safety base station is an Internet access device that facilitates communication at critical locations in a coal mine well. It is suitable for use at a corrosive gas scene in coal mine wells where explosive mixtures such as methane and coal dust are present but where insulation is uncompromised. It does not require the addition of metal cases or fillings to avoid explosion, and the level of energy generated from sparks or thermal effect occurring during normal use or breakdown complies with national standards applicable to mines. The device is characterised by its small size, light weight and high safety level.

Communication-sense-algorithm integration

Network with spatial sense, communication and computation capabilities at the same time which acquire senses of targets or the environment by analysing the transmission of wireless signals.

Glossary

Integrated core network

Mobile network comprises a wireless access network and a core network, the latter of which provides services such as call control, billing and mobility. An integrated core network supports multi-modal core network functions on a simultaneous basis.

5G NSA

The Non-Standalone network architecture model as defined under 3GPP, where the 4G base station is used in conjunction with the 5G base station on the wireless side, while the core network could be a 4G core network or 5G core network. As a transitional network architecture model, NSA allows full utilisation of existing 4G network resources.

5G SA

The Standalone network architecture model as defined under 3GPP, where the 5G base station is used on the wireless side and 5G core network is used. SA is the target infrastructure of 5G network evolution.

Integrated cloud-net cabinet

Integrated deployment of equipment such as edge cloud, wireline access and private wireless net through a centralised cabinet with default typical applications, supporting feature functions such as integrated wireline and wireless access, private net voice and news and capable of flexibly submerged to the access server rooms of corporate business zones or carriers.

Algorithm-net integration

A base resource layer oriented towards algorithm and the network that achieves succinct, swift, open, integrated, safe and intelligent resource supply for novel information infrastructure by implementing the technical architecture of integrated deployment, integrated coordination and scheduling of infrastructure.

NGN

Next Generation Network is a-next generation network based on soft switch capable of providing a wide array of services such as integrated multimedia services including voice, video and data using an open and standardised architecture.

Single carrier

In a dense wavelength-division multiplexing (DWDM) system that facilitates the use of multiple wavelengths on one optical fibre, each wavelength is known as a single-carrier, the speed of which has been increasing with the evolution of optical technology such as single carrier 2.5G, 10G, 100G, 200G, 400G, 800G and 1.2T.

C+L bands

Conventional band and long-wavelength band, the two commonly used wavelength-division frequency bands in the usable wavelengths of optical fibre. In the DWDM system, the C band has already been put to wide applications, while with the increasing demand for bandwidth, the L band has now also been put to trial runs for commercial applications.

QPSK

Quadrature Phase Shift Keying, a form of digital modulation characterised by higher frequency utilisation rate and stronger counter-interference properties.

OTN

Optical Transmission Net, a next-generation backbone transmission network within the optical zone organisational network based on WDM technology.

PON

Passive Optical Network, a network that provides optical access services to users through the use of passive optical network technology and facilitates conservation of optical fibre resources on the main line through the adoption of a point-to-multipoint topological structure. It also offers flow management and security control functions.

FTTR

FTTR (Fiber to The Room) is a networking mode connecting different indoor AP with the indoor all-optical node through optical fibre to achieve a 1000M+ coverage throughout the house.

MEC

Mobile Edge Computing, through which services and cloud computing functions required by telecom users IT can be provided from a nearby point using wireless access networks to create a telecom service environment featuring high performance, low latency and high bandwidth, accelerating the fast download of contents, services and applications in the network to allow uninterrupted premium network experience on the part of consumers.

TECS

Tulip Elastic Cloud System, the IaaS (Infrastructure as a Service) cloud computing and management platform in the Cloud series ICT integrated cloud product solution developed by ZTE on the basis of the OpenStack cloud management platform with the integration of an NFV (Network Functions Virtualization) architecture.

Glossary

NEO

Native Enhanced-cloud Orchestration, the enhancement of the performance and security of the native cloud system through hardware enhancement, software coordination and full-system native design, supporting bare machine, virtual machine and container to provide supreme service experience in native cloud evolution.

DPU

Data Processing Unit, a specialised processor for the data centre providing functions such as SD network, SD storage and SD accelerator to solve loading required by protocol transaction, data security and algorithmic acceleration, offering better performance than CPU in data IO processing.

Low bitrate HD

Transmitting contents and providing experience of HD display using lower video bit rates to enhance user experience while reducing the requirement for network transmission.

vSTB

Virtualization Set Top Box, the upshifting of services traditionally processed in a physical set-top box to the cloud and the transmission of the processed data back to the set-top box by way of video stream, thereby reducing the requirement for set-top box upgrade and software compatibility.

Algorithmic network A novel information infrastructure that allocates and flexibly modulates computing resources, storage resources and network resources among the cloud, the network and the edge on an as-needed basis according to business requirements.

CDN

Content Delivery Network, a network structure capable of redirecting on a real-time basis a user's request to the closest service node available to such user based on network flow and information of various service nodes such as connection, load, distance from the user and response time.

XR

Extended Reality, a collective reference to AR (Augmented Reality), VR (Virtual Reality) and MR (Mixed Reality), which is an environment featuring the combination of reality and simulation and human-machine interaction enabled by computer technology and wearable device.

VR

Virtual Reality, a simulated environment that allows the creation and experience of a virtual world. VR technology is the technology that expresses the environment and objects in real life through a 3D model, which is a reality simulated by computer technology.

AR

Augmented Reality, a technology that integrates virtual information and the real world by applying virtual information such as text, graphic, 3D model, music and video to the real world, thereby augmenting the real world.

CPE

Customer Premise(s) Equipment, equipment responsible for connecting and handling at the customer's location when the service is provided to users.

sPV

Smart Photovoltaic is a direct-current overlay solution deployed at the station point. Its power conversion unit allows the application of maximum power tracking technology on the solar battery panel unit component to maximise the power generation efficiency of solar components while increasing the flexibility of photovoltaic deployment at station points.

5G private network Corporate or industry wireless private network built according to 5G standards and separated from the 5G public network operated by carriers.

High-precision time protocol

Time protocol refers to the process of disseminating standard time information to synchronise local clocks with the standard time. High-precision time protocol means time protocol with a higher level of accuracy and precision.

Private chip

An approach to form a network on an as-need basis by segregating multiple virtual end-to-end networks from uniform basic network facilities to cater to the safety, separation and protection requirements of different services.

Differential protection Protection for power transmission circuits and electrical equipment. In normal operation, the electric current entering the protected equipment is equivalent to that exiting the equipment, and the differential current equals to zero. When the differential current is higher than the default value set in the differential protection device, the circuit breaker on the sides of the protected equipment will be activated and power will be cut off from the malfunctioning equipment.

Chairman's Statement

DEAR SHAREHOLDERS,

I hereby present the annual report of the Group for the year ended 31 December 2022 to all shareholders, and express sincere gratitude on behalf of the Board of Directors for your concern and support for ZTE.

Year 2022 is the opening year for the Company's strategic expansion phase. In retrospect, this was a year subject to austere external conditions, underpinned by complicated geopolitical developments and increasing downside pressure for the global economy. Nevertheless, bravery is best manifested at times of ordeal and tribulation, and a precious gem is born only from meticulous polishing. Given multiple challenges faced by our operation owing to the uncertainties, we firmly grasped the opportunities presented by the global trend of digitalisation and low-carbon green principles, pursuing steady development according to our stated strategic routes as we persisted in committing our best endeavours to the most difficult tasks and increased our investment in R&D on an ongoing basis to consistently improve our core competitiveness incritical technologies and products. We continued to reinforce our core strengths and develop new ones, as we reported stable growth in both the domestic and the international markets, as well as year-on-year growth in carriers' network, government and corporate business and consumer business. In the meantime, rapid growth was sustained in innovative business primarily represented by "server and storage, 5G industry application, automobile electronics, digital energy and smart home". During the year, ZTE staff strived for progress as they overcame difficult hurdles against all odds to forge a solid foundation for the smooth commencement of the Company's period of overtaking.

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ZTE Corporation published this content on 26 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 March 2024 10:44:01 UTC.