ZTE has denied reports that it is planning to transfer its smartphone business into a new joint venture valued at approximately $5.6 billion.

The Chinese telecommunications company was reportedly negotiating with a major internet company and Shanghai state-owned investors to restructure its consumer smartphone operations.

However, ZTE rejected the claims on November 3, telling several Chinese news outlets that the reports were inaccurate.

According to The Paper, the company also said it reserved the right to take legal action over the publication and circulation of the claims.

What the Report Said About a $5.6 Billion Deal

The original report claimed that ZTE was preparing to move its consumer smartphone operations into a jointly owned company involving three parties: ZTE, a major Chinese internet company, and Shanghai state-owned investors.

The proposed business was reportedly valued at approximately $5.6 billion.

The unnamed internet company was said to be considering an investment of around $1.1 billion.

According to the report, the final valuation, ownership percentages, and transaction structure had not been agreed upon.

Discussions allegedly began in April 2026 and gained momentum in July.

The parties were reportedly close to agreeing on a cooperation model by September, with an announcement originally planned for late October.

However, the reported announcement never took place.

The proposal was said to cover ZTE's consumer smartphone operations in China and international markets, rather than the sale of the entire company.

RedMagic Gaming Phones Said to Be Excluded

The original report also claimed that ZTE's RedMagic gaming smartphone business would remain outside the proposed joint venture.

This meant the transaction would primarily involve ZTE's mainstream consumer smartphone operations.

Meanwhile, router products and home terminal devices were reportedly expected to return to the parent company's direct management.

The proposed arrangement could have provided additional investment and operational support for ZTE's smartphone business while allowing the parent company to focus on its other operations.

However, ZTE's subsequent denial casts doubt on the reported restructuring and its proposed terms.

Existing Smartphone Subsidiary Mentioned in the Rumour

The report also pointed to an existing ZTE subsidiary as a possible vehicle for the proposed restructuring.

In April 2025, ZTE established Shanghai Shenqi Jiyuan Intelligent Terminal Co., Ltd.

According to the company's 2025 interim report, the subsidiary was wholly owned by ZTE.

Wang Xiyu was appointed chairman, while Ni Fei served as a director.

The original report claimed that employees from ZTE's smartphone operations had already been transferred to the subsidiary.

However, the existence of the subsidiary does not establish that ZTE planned to sell or restructure its smartphone business through a new joint venture.

ZTE's Formal Rejection of the Restructuring Claims

Following the publication of the report, several Chinese news organisations contacted ZTE for clarification.

On November 3, the company denied that it was negotiating the reported transaction.

ZTE told The Paper that the claims were seriously inconsistent with the facts and said it reserved the right to pursue legal action over the reports.

The company provided similar denials to Yicai and National Business Daily.

As a result, there is no confirmed agreement involving the reported $5.6 billion valuation or the proposed $1.1 billion investment.

The identity of the alleged internet company was never disclosed, and no official transaction terms were announced.

For now, ZTE has rejected the reports, and there is no confirmed plan to transfer its consumer smartphone operations into the proposed joint venture.

Background: ZTE's Smartphone Business and Past Restructuring Efforts

ZTE, founded in 1985, is one of China's largest telecom equipment makers and has been expanding into consumer electronics, especially smartphones, since the early 2010s. The company's market share in China peaked around 2017 before falling due to intense competition from Huawei, Xiaomi, and Oppo.

In 2022, ZTE announced a strategic shift to focus on 5G infrastructure while maintaining a modest smartphone line aimed at price-sensitive segments. The firm created a dedicated smartphone division and, in 2025, set up Shanghai Shenqi Jiyuan Intelligent Terminal Co., Ltd. as a wholly-owned subsidiary to separate consumer-grade devices from its core networking business.

Analysts have long speculated that ZTE might seek external capital to revive its smartphone brand, which has struggled with brand perception and limited R&D resources compared with rivals. A joint-venture model with an internet giant could, in theory, provide both funding and access to ecosystem services such as app stores and cloud platforms.

How Joint Ventures in China Typically Work

Joint ventures (JVs) between state-owned entities, private firms, and foreign investors are common in China's tech sector. A JV usually involves a shareholders' agreement that sets out capital contributions, profit-sharing ratios, governance structures, and exit mechanisms.

When a state-owned investor from Shanghai participates, the arrangement often includes strategic oversight to ensure alignment with regional development goals, such as boosting high-tech manufacturing in the Yangtze River Delta.

For a smartphone business, a JV could mean shared R&D facilities, joint marketing, and coordinated supply-chain management. However, it also entails complex regulatory approvals from the Ministry of Industry and Information Technology and the State Administration for Market Regulation.

Potential Impact on Employees, Suppliers, and Consumers

If the rumored JV had proceeded, ZTE's smartphone staff might have been transferred to the new entity, affecting employment contracts, benefits, and reporting lines. Suppliers could have faced new procurement procedures, while existing distribution agreements might have been renegotiated.

Consumers could have seen changes in product branding, warranty policies, and software updates, especially if the internet partner intended to integrate its own services into the devices.

Because the report was denied, none of these potential disruptions have materialised, but the episode highlights the sensitivity of any restructuring move in a highly competitive market.

What Comes Next: Monitoring Official Channels

ZTE's statement indicates it may pursue legal action if the false claims continue to be published. Observers should watch for any court filings or formal press releases from ZTE, the unnamed internet company, or Shanghai state-owned investors.

Regulatory bodies such as the China Securities Regulatory Commission may also issue statements if the rumours affect market stability. Until an official announcement is made, the smartphone division will continue operating under ZTE's existing corporate structure.

Practical Takeaways for Stakeholders

  • Investors: No confirmed transaction means ZTE's current financial outlook remains unchanged.
  • Employees: No immediate restructuring, but remain alert to internal communications.
  • Suppliers: Continue existing contracts; no new JV-related procurement processes have been introduced.
  • Consumers: Expect no change in product support or branding in the near term.