While China’s largest smartphone makers are making a big push to compete against Apple and Samsung Electronics in the industry’s premium market segment, a little known company in Shenzhen is gunning for millions of consumers around the world with mobile phones priced from US$10.
Transsion Holdings has been focused on bringing affordable smartphones and feature phones, handsets with physical keypads and limited functionality, to developing economies since it was founded in 2006. It is a strategy that allowed the company to become the biggest mobile phone supplier in Africa.
That approach is unlikely to change, despite recent efforts by its larger peers in China to spin off secondary brands that would help drive sales in the fast-growing premium smartphone segment.
“Consumers in most of the markets that Transsion is expanding into are price sensitive, so it’s business model will not change any time soon,” said Zaker Li, a Senior Industry Analyst at IHS Markit.
Transsion reiterated that business strategy in its prospectus for an initial public offering (IPO) on Shanghai’s new technology board. The company said it was “committed to providing high-quality mobile communications terminal equipment to overseas emerging market users, especially those in the ‘Belt and Road’ countries”.
The brainchild of President Xi Jinping, the Belt, and Road Initiative aims to strengthen infrastructure, trade and investment links between China and some 65 other countries that account collectively for more than 30 percent of global GDP and 62 percent of the world’s population, according to the World Bank.
Transsion considers itself a model for a “Chinese tech company going abroad”, as it aims to push forward the country’s agenda under Belt and Road as well as Beijing’s directive for stronger China-Africa relations, according to the firm’s prospectus.
“Following those two national policies is a wise move for Transsion,” said IHS Markit’s Li. “Africa is already where Transsion has been deeply rooted over the past several years.”
Transsion declined to comment because it was “in the quiet period of IPO”, according to a statement from the company, which said details of strategic plans are in its prospectus.
Founded in 2006 by George Zhu Zhaojiang, Transsion is widely recognised as the first mobile phone maker to provide handsets with dual subscriber identity module (SIM) card slots in Africa, where consumers typically juggle several SIM cards to avoid high call charges between different mobile network operators.
The company also provides feature phones with batteries that can last up to a month on a single charge, which was designed to meet demand from consumers in remote areas who travel up to 50 kilometres from their homes to get their handsets charged.
The company, which initially traded as Tecno Telecom with offices in Hong Kong, became the first mobile phone company to establish a manufacturing base in Africa when its handset factory in Addis Ababa, the capital of Ethiopia, was launched in 2011. The firm, which employs more than 14,000 employees worldwide, also has factories in China, India, and Bangladesh.
Recent industry estimates show that Transsion’s bet in Africa has paid off. While 2018 saw a 4.1 percent decrease in smartphone shipments worldwide, Africa experienced year-on-year growth for the first time since 2015, according to data from research firm IDC.
The smartphone market in Africa grew 2.3 percent to reach shipments of 88.2 million units, IDC said in a report last month. This was spurred by the strong performance of the continent’s three biggest markets – Nigeria, South Africa, and Egypt.
Transsion handset brands Tecno, Infinix, and Itel had a combined 58.7 percent share of the still vast feature phone market in Africa last year, according to IDC. In smartphones, the company led the continent last year with a 34.3 percent share, followed by Samsung with 22.6 percent and Huawei Technologies with 9.9 percent.
IDC estimated that Transsion sold nearly 124 million mobile phones last year, driven by the company’s sales network that covers more than 70 countries and territories.
The entry-level pricing strategy for Transsion’s Tecno, Infinix and itel brands also helped grow sales. The average price of its feature phones was 65.95 yuan (US$10) in 2018, while its smartphones cost 454.38 yuan on average – about 5 per cent the cost of Apple’s flagship iPhone XS model, according to Transsion.
While low prices have helped its expansion in emerging economies, Transsion has increased its efforts over the years on research and development, design and manufacturing to keep pace with the larger Chinese smartphone makers, including Huawei, Oppo, Vivo and Xiaomi Corp. Transsion operates research and development centres in Shenzhen and Shanghai, while working closely with local teams in Nigeria and Kenya.
That reflects how China’s major mobile phone players have succeeded in changing people’s perception that domestic suppliers are only good for inexpensive, low-quality products.
Transsion, for example, expanded sales in India a country with almost the same size population as its home market in China after noticing that the local custom of eating with your hands made it difficult to operate a smartphone with oily fingers. So the company developed mobile phones that could be unlocked using an oil resistant fingerprint recognition feature, an example of its extensive localisation efforts.
The other major Chinese smartphone players, however, have remained aggressive in targeting new growth opportunities, as the global mobile phone industry braces for another year of decreased shipments in 2019.
Huawei, Oppo, Vivo, and Xiaomi have each spun off secondary brands to tap into the premium segment while improving technical specifications and design on affordable handset models sold in both developed and emerging markets.
“Despite the success of Transsion brands in both the smartphone and feature phone categories, it is also worth noting the phenomenal growth enjoyed by Huawei and its sub-brand Honor in Africa’s smartphone space,” said Taher Abdel-Hameed, a senior research analyst at IDC, in a report last month.
In its listing prospectus, Transsion said the poor economic base of emerging markets and the turbulent geopolitical environment, which might cause trade tensions or export restrictions, pose as risks to its business.
The company said it plans to invest 3 billion yuan, after completing its IPO, on the development of new mobile phone factories, research and development centres, and consumer electronics products in China to boost innovation and diversify its business.
“Transsion has, so far, been doing a good job in terms of localisation and new product development,” said IHS Markit’s Li. “Its other products, like home appliances, have also become popular in its key markets.”