Marked by a consistent decline, 2023 has been a challenging year for the global mobile phone industry. Yet, one Chinese mobile phone giant is defying the trend: Transsion Holdings.
Transsion has emerged as a standout performer, achieving significant growth and securing its position as a dominant player in the market. The latest data reveals that in the third quarter of 2023, Transsion surpassed Vivo to claim the fifth spot globally in mobile phone shipments, with its global market share reaching 8.6%, registering a 9% year-on-year increase. This growth not only sets Transsion apart in a tough market but also positions it as a formidable competitor inching closer to the fourth-ranked Oppo, which holds 8.9% in global market share.
In both the second and third quarters of 2023, Transsion recorded substantial increases in operating income: 30% and 39% year-on-year respectively. Net profits followed suit, skyrocketing by 194% and 146% respectively, highlighting the company’s robust financial performance.
Since 2023, Transsion’s gross profit margin has been steadily recovering. Compared to hovering around 10% in the past, its gross profit margin has been adjusted to 24% in the last two quarters, reaching 28% in Q3—considerably higher than the gross profit margin of Xiaomi’s mobile business, which is around 17%.
Crucial to Transsion’s success is its ability to adapt to the ever-evolving dynamics of the global mobile phone landscape. Zhu Zhaojiang (also known as George Zhu), founder of Transsion who was previously from mobile phone brand Ningbo Bird, recognized early on the significance of differentiated competition for survival. Steering clear of the highly competitive domestic market, Transsion instead positioned itself strategically in the international arena.
Zhu leveraged his familiarity with feature phone products and combined it with China’s supply chain advantages to achieve significant success in Africa. Now, the company has set its sights on replicating this result in other emerging markets.
Cracking the code in Africa
Since 2023, Transsion has shown counter-trend growth in overseas markets, primarily due to the company’s strong foundation in Africa. Overall, Africa has performed well this year, with its mobile phone industry still on an upward trajectory in Q2 and Q3.
Historically, Africa posed challenges that deterred many Chinese phone manufacturers, including unstable communication infrastructure and frequent power outages. Transsion, however, has been proactive in addressing these challenges over its 15-year presence in the continent.
For example, in response to the instability and high costs of communication signals in Africa, Transsion developed phones with a “four-card, four-standby” design, allowing users to switch to another SIM card when one has no signal. Furthermore, it also developed phones that can save data and be used in weak network conditions.
In addition to infrastructure-related challenges, another hurdle for Chinese phone manufacturers entering the African market has been the difficulty of technology transfer. For example, facial recognition algorithms were customarily developed based on facial data of East Asian and Caucasian populations. This resulted in African users experiencing blurred photos when using their phones to take pictures. To resolve this issue, Transsion collected a large database of African facial data, enabling the creation of image algorithms that cater to African skin tones and diverse facial features.
To cater to the specificities of the African market, Transsion developed phone casings that are resistant to sweat corrosion and high temperatures due to the region’s hot climate. It also designed low-frequency speakers tailored for the region’s music-loving populace.
Transsion has maintained a relatively stable market share in Africa, which has hovered around 40% in the past two years. Beyond the continent, Pakistan and Bangladesh have also emerged as key markets for Transsion, with market shares of 37.9% and 21.5% respectively in 2022.
These regions form the cornerstone of Transsion’s smartphone shipments. However, the solid foundation in these markets is not without potential risks. With the specter of aggressive interest rate hikes by the US Federal Reserve looming, these regions are facing greater debt and inflation risks, making economic recovery difficult and challenging, potentially offsetting the momentum in the smartphone industry. . As such, Transsion has been actively exploring new territories since the start of the year, in pursuit of the next “Africa.”
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Replicating success in new frontiers
Undeterred by global economic headwinds, Transsion has been exploring new markets in Southeast Asia, Latin America, the Middle East, and India. These new markets share similarities with the African market: large populations and low per capita mobile phone ownership.
Moreover, these regions are at the juncture of declining mobile tariffs while undergoing a transition from feature phones to smartphones, presenting a need for structural improvements. Most of these countries also lack mature local smartphone brands and mobile phone supply chains, offering an opportunity for Chinese companies to make inroads.
This allows Transsion to replicate its experience in breaking new ground in Africa.
A recent report from Counterpoint highlighted Transsion’s success in these new markets. In Q2 2023, the company, along with its sub-brands Tecno, Infinix, and Itel, achieved notable growth rates of 148%, 42%, and 17% respectively in Southeast Asia, making them the fastest-growing brands in the region.
In Latin America, the Middle East, and India, the sub-brands’ growth rates reached 56% (Tecno), 29% (Infinix), and 41% (Itel).
Transsion’s approach to these new markets typically involves adjusting its product combinations to increase average transaction values. In the past, its best-selling phones in the African market had an average price of around RMB 300 (USD 42). In recent years, the company has gradually diversified its product line to cater to a wider audience, transitioning from feature phones to smartphones and even venturing into more expensive foldable screen phones.
Various financial reports suggest that the average price of Transsion’s smartphones is approximately six times that of its feature phones. The proportion of its smartphone shipments has increased from 22% in 2016 to over 40% this year. Notably, smartphones accounted for around 40% of Transsion’s total sales volume, yet contributed to 80% of its total revenue.
Transsion’s sub-brands, each with unique value propositions of their own, have also allowed the company to experiment with the mid- to high-end market. Tecno targets the middle-class consumer group, Infinix focuses on the younger, tech-savvy demographic, while Itel caters to the mass market with lower priced models.
Notably, Transsion’s move into India comes at a strategic time, coinciding with a period when major Chinese phone manufacturers are redirecting their focus. A slowdown in investments by companies like Xiaomi has created an opportunity for Transsion to gain market share in India.
Chinese phone manufacturers compete on global turf
While Transsion has solidified its position in Africa and demonstrated success in new markets, it now faces the challenge of increasing competition as other Chinese manufacturers set their sights on these regions. Southeast Asia, Latin America, the Middle East, are no longer untapped markets, presenting a more intense battleground for Transsion.
As Chinese manufacturers make their entrance, their common target is likely Samsung, previously the market leader in these regions where its market share was once as high as 40%.
The reshuffling has begun.
In Latin America, Samsung, while retaining its position as the market leader in Q3 this year, is facing fierce competition from Chinese manufacturers like Xiaomi, Honor, and Motorola. Xiaomi has deepened its collaborations with telecommunication companies, Honor is streamlining its sales channels, and Motorola, by ensuring a steady supply of products, has been increasing its shipment volumes.
In the Middle East market, Xiaomi, Realme, and Honor have launched aggressive campaigns to compete for the low-end market. In Q3 2023, the growth rates of Xiaomi and Realme in the Middle East were 9% and 133% respectively.
In Southeast Asia, Oppo, which was the first to enter this market, has seized the top spot from Samsung. Other manufacturers, including Xiaomi, are also attempting to introduce more products at different price points to capture a larger share of the market.
As Transsion continues to expand globally, the challenge lies in navigating this increasingly competitive landscape. While the company’s success in Africa and recent triumphs in new markets are commendable, the road ahead requires strategic maneuvers to stay ahead. Transsion’s ability to adapt, innovate, and resonate with diverse consumer preferences will ultimately be key to sustaining its growth on the international stage.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Qiu Xiaofang for 36Kr.