China’s next tech star is being treated very dearly in Africa. Little-known Shenzhen Transsion stands out among those waiting to list on Shanghai’s new board. The Chinese handset-maker has strong Belt and Road credentials as the top brand in the last frontier. With striking similarities to the $40 billion Xiaomi, there’s plenty to get excited about.
The company founded by Zhu Zhaojiang has quietly emerged as Africa’s top handset seller, besting the likes of South Korea’s $272 billion titan, Samsung Electronics, as well as Chinese compatriots from Huawei to Xiaomi. Known for cut-price entry-level devices costing as little as $10, Transsion accounted for nearly half of Africa’s 215 million mobile phone shipments last year, according to research firm IDC.
It’s a huge market to play for. Feature phones – those that offer basic calling and texting functions, as well as limited internet services – are still the norm. But that is changing as rising incomes spur more Africans to upgrade to snazzier devices. Smartphone penetration in sub-Saharan Africa, for example, is forecast to double to 67 percent by 2025, according to forecasts from industry association GSMA.
The handset makers’ early success in the continent will have caught Beijing’s attention. Officials are keen to deepen Sino-African ties as part of the Middle Kingdom’s Belt and Road initiative. Last year, China’s President Xi Jinping pledged another $60 billion in financing to the continent, a region which accounted for over three-quarters of Transsion’s sales in 2018. The company also has a manufacturing plant in Ethiopia, as well as research and development centers in Nigeria and Kenya.
Transsion learning Market aesthetics to acquire public attention quickly
As yet, Transsion lacks higher-margin businesses which handset makers typically rely on to boost earnings. Last year, despite outselling Xiaomi in mobile phones globally, the upstart’s net profit margin of 3 percent was less than half of its rival’s. The gap may close with Transsion’s push into more lucrative appliances, gadgets, and internet services. Its Boomplay music streaming app is already Africa’s most popular, with 43 million active users, for example.
On the same 2018 earnings multiple as Xiaomi, its wannabe would be worth roughly $2 billion. With plenty of room to grow, Transsion’s Shanghai debut could push all the right buttons.