Investor Network defends the crown
Edited by Wu Yue
Among Chinese mobile phone manufacturers, there is a player who has almost no presence in the domestic market - 688036. SH), this company has zero sales in China, but it occupies more than 50% of the mobile phone market share in Africa, and its shipment volume is stable in the top five in the world, which can be said to be a veritable "king of African mobile phones".
In fact, looking at the development history of Transsion Holdings, it entered the African market as early as 2006, taking a unique path, relying on localization strategies, and taking root and growing in Africa with the playing style of "rural encirclement of cities".
In contrast, domestic domestic mobile phone brands, after experiencing the world's most brutal market competition, second- and third-tier brands have gradually faded out, the industry concentration trend has gradually become clear, and the differentiation of different brands at the same price has become more and more reduced, and the homogenization is serious.
From the perspective of the global smartphone market, shipments in 2021 will reach 1.355 billion units, and domestic brands occupy three of the top five manufacturers. Among them, emerging markets are providing new increments in the context of shrinking global mobile phone shipments.
Smartphone shipments in select emerging markets (100 million units)
Source: ACADEMY OF INFORMATION AND COMMUNICATIONS, Consultant of Deep Investment Research
The growth of the emerging mobile phone market has brought new development opportunities to a number of mobile phone manufacturers, Transsion Holdings is a more successful domestic brand going to sea, but today, the company is also facing the "ceiling" of the overall slowdown in the mobile phone market, and how the company will respond is particularly concerning.
Mobile phone out to sea alternative samples
The person who created the "King of African Mobile Phones" is Zhu Zhaojiang, the helmsman of Transsion Holdings, who is a veteran of the era of mobile phone recklessness and served as the sales leader of Waveguide, who had an advantage in the era of functional machines. At that time, the domestic market, the flood of cottage machines, no core technology, lack of innovation, Zhu Zhaojiang foresaw that domestic brands will eventually compete with multinational brands, so he began to enter the African market, the reason is very simple: although the market base there is thin, but the market potential is large.
Transsion Holdings first chose Nigeria, the most populous country in Africa, formulated a special mobile phone according to the characteristics of users in the African market, chose to use a dual-card dual-standby low-end functional machine, focused on the user experience, fit the local consumer demand, and became a "divine machine" in the eyes of African consumers.
Relying on a large number of low-end functional machines and markets that are not valued by giants, TRANSSION Holdings' African localization strategy has achieved rapid development in the past few years. But sooner or later the feature phone will be eliminated, the former giant Nokia has fallen, and now the world's top mobile phone giants, all of which rely on smart phones to win the world.
Therefore, Transsion Holdings at that time was not only a giant in mobile phone sales, but also a growing enterprise with insufficient technology and fierce market competition.
Behind the precise targeting of user needs, it is actually the "dimensionality reduction attack" of the entire industry chain of the Chinese mainland on African mobile phone competitors.
According to the prospectus of Transsion Holdings, half of its six major own factories are in China, and the top five suppliers in 2016-2020 are all from China, accounting for more than 30%. In addition, the company has also set up factories in Ethiopia, India, Bangladesh and other places to respond quickly to market demand.
In addition, what matches the growth market of Africa, in addition to price sensitivity, is its dependence on offline channels.
First, through the promotion of advertising like a sea of mountains, in addition to television, the Internet and other media, roadside telephone poles, various types of wall advertising is the main force of promotion, just like the Chinese countryside more than a decade ago, the brand slogan of Transsion Holdings has penetrated into the hearts of consumers in the local area.
The second is the establishment of Carlcare, the largest after-sales system in Africa, in 2009. Due to the poor infrastructure construction in Africa, many foreign mobile phone companies are reluctant to build after-sales service outlets in the local area, and choose to outsource their after-sales services to local companies, resulting in uneven after-sales levels and no guarantee. Transsion Holdings is the first foreign mobile phone company to build an after-sales service network in Africa. The relatively unified and perfect after-sales system has been recognized by African consumer groups.
The ceiling of the mobile phone market looms
According to the performance express, in 2021, the operating income of TRANSSION Holdings was 49.254 billion yuan, an increase of 30.33% year-on-year; the net profit attributable to the mother was 3.924 billion yuan, an increase of 46.08% year-on-year. In the African market, its traditional smartphone shipments account for up to 40%, accounting for nearly half of the market share in more than 50 regions of Africa.
The "King of African Mobile Phones" is still strong in a short time, but this head sounds loud, and the pressure behind it is also huge.
According to the statistics of the agency IDC, in 2019, the market share of mobile phones (including smart phones and functional machines) produced by TRANSSION Holdings in the African market has reached 52.5%. In general, after a single market share reaches 50%, the marginal difficulty of further increasing market share increases exponentially.
Transsion Holdings Regional Revenue Change (RMB100 million)
Source: Wind
On the other hand, with the entry of xiaomi, OPPO and other manufacturers into the African market, the "cake" of Transsion Holdings is even more eyeing. The foundation on which the company depends for its survival has been leveraged by rivals, and the situation in other emerging markets is not optimistic.
In Southeast Asia, India and other markets, TRANSSION Holdings has to compete with domestic competitors that have been rooted for many years. Compared with these domestic mainstream mobile phone manufacturers who have experienced "death competition", TRANSSION Holdings does not have an advantage in technology research and development.
Its research and development costs in the first half of 2021 accounted for only 2.8% of its operating income, and the issue of low research and development expenses was repeatedly inquired by the Shanghai Stock Exchange when it was listed.
In terms of channels, as a "new" player in the "new" market, it is bound to spend higher marketing expenses or various costs, which can also be confirmed from the financial report, and the gross profit margin of Transsion Holdings' business in Asia and other regions in 2020 is 18.27%, far lower than the gross profit margin of the African business of 30.99%.
Obviously, Transsion Holdings has achieved great success by relying on market regional positioning and differentiated playing methods, but its sustainability remains to be seen. At the same time, due to rising raw material prices and chip shortages, the company's gross profit margin also fell from 31% in 2019 to 21% in Q2 2021.
Simply selling hardware has been unable to support the huge volume of TRANSSION Holdings, with the natural advantages of mobile phones as the entrance to the Internet, to create a full-coverage application ecology around smart phones, to open up new business models, may be the future road of TRANSSION Holdings.
Look for the next golden decade
In January 2022, Xiang Hailong, former vice president and number two person of Baidu, joined TRANSSION Holdings as the president of the Mobile Internet Center (Business Unit), mainly responsible for the mobile Internet business. The company has also elevated the mobile Internet business to one of the group's three major strategies.
Looking back at Hailong's resume, before joining Transsion Holdings, Xiang Hailong was the CEO of Gome Online, responsible for Gome's e-commerce APP "Really Happy". "True Happiness", as an important part of the second stage of Gome's retail "Home Life", should have shouldered the role of turning the tide. However, observing the relevant information of "True Happiness" and even Gome's retail, it can be found that it has not brought significant promotion to the level of Gome's business development.
However, after Xiang Hailong came to Transsion Holdings, there were still many cards in his hand. The company's three brand mobile phones are equipped with TRANSSION's own intelligent terminal operating system TRANSSUS based on the secondary development and deep customization of the Android system platform. As of 2021Q3, the number of users of TRANSSION OS has reached 220 million. Relying on the natural, continuous and stable traffic of TRANSSION OS, the proportion of application distribution and advertising business revenue contributions for the value-added realization of existing active users is expected to continue to increase.
Transsion's products and business systems
Source: Company Announcement
In terms of independent apps, TRANSSION Holdings has also had more than 10 independent and cooperatively developed applications with more than 10 million monthly active users. Among them, Boomplay is currently the largest music streaming platform in Africa, with more than 60 million monthly active users. In terms of short video, TRANSSION's Vskit ranks first in many countries in Africa.
In the long run, the mobile Internet platform based on user traffic and data resources is the core foundation for the company to develop mobile Internet products. Although transsion holdings' Internet business accounts for only 0.99% of revenue in 2020, from the perspective of China's mobile Internet development experience, the voice of the Internet platform is far stronger than that of a hardware company.
So, can Xiang Hailong help Transsion Holdings to shift from a hardware vendor to an Internet platform service provider, seize the opportunity to become an African version of Sea or Tencent, and complete a new round of transformation? Let's wait and see. (Produced by Thinking Finance)■