By China House Student Fellows Xu Wen Chong, 17, China, New York University, Liu Si Qi, 20, China, The University of Warwick and Zhang Qin Yuan Bo, 15
Transsion Holdings announced its third-quarter report on October 27 this year, showing that Transsion has achieved year-on-year growth of 75% in revenue and 78% in net profit in the third quarter. Moreover, the operating income increased by 48.15% over the same period, and the parent company’s net profit increased by 50.23% over the same period. 2020 has witnessed a significant rise of Transsion’s share price, up 179.9%.
In recent years, the most eye-catching characteristic of Transsion is its technological innovation based on the local needs of Africa: self-timer for dark skin, long battery life, multi-cards support, audio suitable for outdoor playback, and anti-sweat materials.
The Layout of the Entire Industry: “Growth” Under the Pandemic
In the first quarter of 2020, International Data Corporation (IDC) research manager Ramazan Yavuz said: “After the outbreak of the new coronavirus, China has closed some of the factories, which has severely disrupted the supply of smartphone parts.” IDC also predicted that smartphone sales in Africa will drop by 14.9%. However, counterpoint data shows that Transsion sold 4.6 million mobile phones in the first quarter of 2020, which was only a 2.13% decrease compared to the same period in 2019.
As early as January 26th, Transsion’s manufacturing center started preparing for pandemic prevention and resumption of work. Transsion’s Chongqing firm officially resumed its work on February 11. After the restart of the three production lines, on February 22, the first 3,000 smartphones were successfully rolled off the production line and exported to Africa.
Undeniably, Trassion’s global layout is one of the contributing facts in its growth during the pandemic. Transsion disclosed in its initial public offering prospectus (IPO) that the proportion of its production was 37.7% in 2017 and has reached 57.72% in June 2019. Independent production allows more control over supply, especially for overseas factories. Among them, the Ethiopian plant, which was established in 2012, has expanded its function from simply assembling functional phones to producing a whole smartphone in recent years. From a small factory with less than 40 employees, the factory has developed into a large enterprise employing thousands of people. It has also become a primary source of supply for Transsion in Ethiopia and nearly the entire East African market.
In addition to its global layout, Transsion’s resilience is also rooted in its innovative gene. According to China Intellectual Property News’s analysis, Transsion’s patent embodies “low cost and high performance” in its research and development stage. Among its 1,679 patent inventions and utility models, information with “cost/savings” yielded 639, accounting for 38% of all patents. In the case of low mobile phone prices, the overall gross profit margin can remain above 20% overall.
The supply chain serves as another vital element in Transsion’s success. Transsion’s products are mainly ordered through distributors on a “pay first, deliver later” basis, and reach the users through its stores or sub-distributors. Since Transsion’s dealers usually place orders in a “multi-type, small-batch” way, the dealers’ overall inventory level is low, and the goods are rarely over-stocked. To support this high-frequency and fast delivery, Transsion has set up different logistics warehouses in Dubai, Ethiopia, India, and Bangladesh. Combining air and sea transportation, relying on sales entities and purchasing companies in Hong Kong and Dubai, Trassion directly connects to overseas distributors or factories in need. The short logistics cycle can effectively improve efficiency.
The Success of Transsion’s ‘sinking’ sales is also closely related to local distributors. According to the IPO, until the end of June 2019, distributors in Africa were mainly long-term cooperative customers who signed contracts before 2016. This part of the distributors’ corresponding revenue accounted for 64.65% of the total revenue in Africa. Relying on their rich market experience, these “long-term customers” have already penetrated into the local market. With the improvement of their operating capabilities and financial strength, they are likely to take the initiative to expand their own business.
In terms of after-sales service, Transsion is the first foreign mobile phone company to build an after-sales service network in Africa. It not only provides mobile phone fixation services but also sell accessories, enhancing the sense of security for local consumers. In 2009, its own after-sales service brand Carlcare was established. Through years of development, Transsion has established 86 after-sales service centers and more than 1,000 after-sales maintenance collection points in Africa. Remarkably, Transsion has built the largest user service network in Africa, and its global service network has reached more than 2,000.
New Growth Point in Africa: Smartphones + Internet
With the support of the entire industry chain from production to after-sales, the pandemic has opened up more possibilities for the development of Transsion. According to the “Quarterly Mobile Phone Tracker,” in the second quarter of 2020, the shipments of feature phones in Africa fell by 10.6%. On the contrary, the smartphone market remained stable and even grew by 0.1%. Despite weakened market demand and more price-sensitive this period, the smartphone market in the price range of $0 to $80 has grown significantly, reaching 18.2% per quarter.
“Africa is the only continent where 2G, 3G, and 4G networks coexist. However, as African countries develop, the feature phone market is slowly shrinking and the process of converting feature phones to smartphones is accelerating, which means that the smartphone market has huge growth potential. “Introduced by Arif Chowdhury, vice president and one of the founding team members of Transsion Holdings. A smartphone can even become a “laptop” for a family in Africa, through which they can finding a job, submitting a resume, and working online. The lockdown caused by the pandemic has instead brought new growth opportunities.
Following the growth of smartphone sales during the pandemic, Transsion’s Internet business is also growing. According to its report for the first half of 2020, Transsion has seven apps with monthly activity exceeding 10 million. These apps covered all types of media content, such as short videos and audiobooks. CITIC Securities believes that with the continued growth of smartphone sales and existing users, Transsion’s Internet revenue is likely to double.
One of the instances of Transsion’s Internet business is the African version of Tik Tok, Vskit. In fact, before the pandemic, Vskit has set up a creative team composed of local employees. With the localized processing of short video content, the software once ranked first in downloads of entertainment apps on the Google App Store in Nigeria. Also, Boomplay, officially released in 2016, has become a leader in the African music streaming track.
After successfully invented localized APP like Boomplay and Vskit, Transsion began to work with Chinese Internet companies such as NetEase, China Reading, Tencent, etc., to deploy a series of mobile internet apps through internal incubation, joint venture investment. Including information flow content (Scooper), short video (Vskit), online reading (Ficool), browser (Phoenix Browser), data flow tool (SIMO), etc.
The development of the mobile Internet has also formed a bond with the traditional mobile phone business. Infinix, a smartphone brand focusing on the younger consumers in emerging markets, pioneered an O2O marketing model in Nigeria during the pandemic. The promotion team relies on social media platforms such as Facebook, Viskit, and WhatsApp to carry its contents. It also invited its brand ambassador Davido to post recommendations on its social media homepage. On April 3, Infinix’s e-commerce platform X-PARK was also launched in Nigeria and provide free delivery services to users who place orders, opening up new online marketing channels.
In addition to commercial activities, Transsion’s localization also helps Transsion to “stand with Africans” as much as possible. During the pandemic, Infinix created an online consultation platform, the first mobile phone brand in Africa to provide users with online medical consultations. The services provided include real-time online consultations, personal protection manuals, and interview videos of Dr. Adebisi Lawal, a well-known local medical doctor. The Tecno brand has also launched a map of confirmed cases by cooperating with many countries’ governments and jointly launched the “Home Challenge” activity with Vskit and Boomplay to help overcome challenges for people at home.
In June, Transsion has announced that it had reached a cooperation with the United Nations Refugee Agency to support the UN Refugee Agency’s global education project “Educate A Child (EAC).” During the pandemic, 50,000 masks and a batch of tablet computers were donated to help UNHCR’s pandemic prevention.
The secret of Transsion’s continuous growth is not only technology innovation, but also the layout of the entire industry in emerging markets.
China House is a social enterprise that brings young Chinese to the global south for research, conservation activities and development projects.
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