On April 23, Shenzhen Transsion Holdings Co., Ltd. (hereinafter referred to as "Transsion") disclosed its annual report, which showed that in 2023, the company will achieve operating income of 62.295 billion yuan, a year-on-year increase of 33.69%, and a net profit of 5.537 billion yuan, a year-on-year increase of 122.93%. At a time when the mobile phone market continues to be sluggish, Transsion's performance is particularly eye-catching.
Continue to cultivate emerging markets
From the perspective of production and sales, in 2023, Transsion's production volume will increase by 28.51% over the previous year, sales volume will increase by 24.3%, and inventory will increase by 53.57% over the previous year.
Transsion's performance is undoubtedly in stark contrast to the mobile phone market, which has struggled to ship, with total global smartphone shipments in 2023 reaching 1.14 billion units, down 4% from the previous year, according to Canalys statistics. According to the IDC report, global smartphone shipments fell 3.2% year-on-year to 1.17 billion units last year, the lowest shipments in a decade.
According to the data disclosed by Transsion, its mobile phone shipments have surpassed Xiaomi and OPPO last year, ranking behind Apple and Samsung, and the sales volume of Transsion mobile phones in 2023 will be about 194 million units, while according to IDC statistics, Xiaomi and OPPO will ship 146 million units and 103 million units respectively.
According to IDC statistics, in 2023, Transsion will have a market share of more than 40% in the smartphone market in Africa, ranking first. In the South Asian market, it accounts for more than 40% of the Pakistani smartphone market and more than 30% of the Bangladesh market, both ranking first, and its performance in the Indian market is slightly inferior, with a market share of 8.2%, ranking sixth.
In 2023, its sales revenue in Africa alone will reach about 22.06 billion yuan, but its products are also becoming more and more popular in Asia, and its style of play in Africa may be replicated, with the growth rate of Transsion's operating income in Asia last year as high as 55.19%, far exceeding the growth rate of 6.74% in Africa.
Tailor-made in "sinking".
A number of research reports pointed out that emerging markets are important not only because of their gradually increasing per capita income, as well as increasingly perfect communication base stations, but more importantly, the demographic dividend. Whether in Africa or South Asia, the rapid growth of young people has translated into a steady stream of purchasing power, and young people's pursuit of new things has propelled Transsion's performance all the way up.
What the market is concerned about is why Transsion has received the most dividends in the face of emerging markets. However, from the perspective of the industry, the main reason is that Transsion entered Africa earlier, and its development and growth have gone through more than ten years, but it has only been noticed in recent years.
Looking back on the history of mobile phone development, around 2004, Bird mobile phone almost sat in the top spot in the domestic market, behind it is not without hidden worries, at that time it was still the world of feature phones, the first iPhone has not yet been released, smart phones have not yet landed, the lack of innovative direction of feature phones have to compete for cost performance, due to the technical threshold is not high, copycat machines, white card machines into the market, impacting the status of Bird mobile phones.
Zhu Zhaojiang, then executive vice president of Bird, was keenly aware of the difficulties and keen to see the dividends of emerging markets, and in 2006, he established Transsion Mobile Phone Co., Ltd. in Hong Kong and has since entered Africa. At that time, there were a large number of operators in Africa, and the signal coverage area was chaotic, and users needed to switch calling cards frequently when making calls between different areas.
After entering the era of smart phones, Transsion has created beauty technology suitable for local users according to the skin color characteristics of African people, and it has collected tens of thousands of black photos in Africa, and carried out research on contour focusing, exposure compensation and other functions for dark skin tones.
Judging from the data of the 2023 annual report, the cumulative investment in the project of "Research and Application of Digital Skin Tone Theory and Key Technologies" is about 23.41 million yuan, and the investment in the project of "Dark Shooting Image Engine" is about 29.51 million yuan, and the company's overall R&D expenses reached about 2.256 billion yuan last year, a year-on-year increase of 8.56%.
For the sinking market, industry observer Major General Ding told the Beijing Business Daily reporter that it is not difficult for mobile phone companies to sink products, but the key is to innovate in the process of sinking.
How to respond to potential threats
Transsion, which has won the title of "King of Sinking", also faces potential threats, and how Transsion can maintain its current position is a matter of concern when other manufacturers continue to increase their weight in emerging markets.
According to Counterpoint data, the market share of mobile phones priced at US$120, or less than 829 yuan, has dropped from 41% two years ago to 26% in 2022, compared to 11% of high-end phones priced at 30,000 rupees, or more than 2,505 yuan.
From the price point of view, at present, Transsion is still hovering in the low-end market, Transsion's mobile phones are mainly divided into three series, namely TECNO, itel, Infinix, the price of the main model is about 1000-2000 yuan, for example, its new Tecno Pova 6 Pro 5G mobile phone, converted into RMB, the price is about 1800 yuan, and the price of Tecno Spark 20 is about 850 yuan.
In 2023, although it is growing rapidly in Asia, its gross profit margin is only 21.11%, which is less than 30.97% in Africa, and from the perspective of the company's overall sales gross profit margin, although it reached 24.45% last year, it is only higher than 2021 and 2022, and is still less than 25.74% in 2020.
At the same time, the pace of other mobile phone manufacturers is accelerating, and the relevant person in charge of Xiaomi told the Beijing Business Daily reporter that in 2023, outside the Indian market, Xiaomi Group has increased its expansion into emerging markets, and in Latin America, the Middle East, Africa and other regions, the market share has grown rapidly, and these regions are mainly dominated by low-end products.
Vivo told a reporter from Beijing Business Daily about the achievements of V-appstore in overseas markets. V-appstore is vivo's overseas application distribution platform, based on its wide range of overseas consumer groups of smart hardware, vivo continues to cultivate in emerging markets such as South Asia and Southeast Asia, and this year, vivo will continue to explore Bangladesh in South Asia, as well as Saudi Arabia, the United Arab Emirates and other Middle East markets, bringing more opportunities for developers to enter emerging markets.
In the opinion of experts, Transsion still has its own "moat" in the face of peer competition, that is, sales channels. Major General Ding pointed out that the e-commerce industry in emerging markets is not very developed, so mobile phone brands want to build a sales network, they must make a lot of "hard work", one by one to conquer dealers in different regions, and collect market information in different regions one by one.
For channel construction, Transsion disclosed in its 2023 annual report that the company's products have entered more than 70 countries and regions around the world, and have established cooperative relations with more than 2,000 dealers.
Judging from its latest actions, Transsion is not willing to stay in the low-end market for a long time, and under the wave of AI, Transsion is unwilling to be unwilling, and in May 2023, Transsion's TECNO Camon 20 product has been connected to ChatGPT to achieve text interaction. In the first half of 2023, Transsion's planned investment in R&D projects such as AI intelligent algorithms and AIGC image generation has reached nearly 100 million yuan.
Experts believe that Transsion's first-mover advantage has won time for its next development, whether it is to continue to deepen the sinking market, or to try high-end, to a certain extent, Transsion has the cost of trial and error, depending on whether it can take advantage of this opportunity.
A reporter from Beijing Business Daily interviewed Transsion Holdings on related issues, but did not receive a reply as of press time.
Beijing Business Daily reporter Tao Feng Wang Zhuli