ZTE has, until now, been well ahead of its larger compatriot Huawei in penetrating the smartphone market, but now it is losing its lead. Huawei has overtaken its rival in overall mobile device shipments, and is looking to move upmarket into own-branded, high end handsets for key markets like the UK.

Huawei shipped 12m more mobile devices than ZTE in the first half of this year, according to TelecomsAsia. Its shipments were up 42% year-on-year to 72m units, compared to ZTE''s 60m. That figure includes dongles and other gadgets, but the Chinese giant's performance was even more impressive in handsets, which doubled their sales in the period. The main driver of that growth was the family of midmarket Android smartphones.

Overall, Huawei reported an 11% rise in revenues during the period, compared to the first half of 2010, reaching CNY98.3bn (16bn) and an operating profit of CNY12.4bn. The firm said it was confident of hitting its target of full year sales of CNY199bn ($31.13bn), which would represent 7% growth on 2010. This would be far slower than its 2010 trajectory, which saw revenue rising by 24% on 2009, but would bring it within striking distance of Ericsson, whose full year sales are forecast to reach about SKR227.6bn ($35bn).

However, a stronger devices business, plus relatively new but powerful pushes into cloud services and the enterprise, could boost growth rates again. And of course, the Chinese firm has managed its impressive performance while virtually excluded from major deals in the north American market - the one that has been Ericsson's chief driver in the past year. A relaxation of security agencies' restrictions on Huawei, however unlikely in the US, could enable it to overtake its Swedish rival. In 2010, it had 16% of the network infrastructure market, compared to Ericsson's 20%.