While barely known in China, the handset maker has conquered the African market, shipping over 120 million phones last year; it is now going public in Shanghai.
His next toy is likely to be made by Transsion. Image credit: Alex Radelich/Unsplash
The Shanghai Stock Exchange Star Market is heating up again: three new stocks started trading on September 30. One of them – Transsion (传音控股, 688036:SH) – jumped from CNY 35.15 (USD 4.94) to CNY 59.63 (USD 8.37) per share in the morning session, boosting the firm’s market capitalization to CNY 47.7 billion (USD 6.7 billion). It is now the third-largest company among those who have their stocks circulating on the sci-tech board.
As previously reported by EqualOcean, localization is what differs Transsion on the complex global consumer electronics scene. Almost every product is designed and marketed in accordance with the nature of demand in a certain region. In this vein, local customs and cultural features in many respects shape the company’s market strategy. Handsets with oil-resistant sensors for the Indian market and smartphones with frontal cameras calibrated for darker skin tones for African consumers are what it is famous for now.
A comprehensive understanding of the economic and business environment is another valuable tool in the firm’s strategic arsenal. There are many mobile operators in various subregions of Africa; producing three- and even four-SIM-card phones looks like a decent attempt to grab a significant market share. And it works.
These smart features along with low production costs have boosted Transsion’s scale in just a few years. With a revenue of over CNY 22.65 billion (USD 3.2 billion) in 2018, it is the third company on the list of the Star board applicants by this indicator, trailing only state-backed transportation giant CRSC (China Railway Signal & Communication, 688009:SH) and solar energy giant Trina Solar (A19173:SH).
Despite all the hype around Transsion and the phone maker's stellar performance in Africa, there are some cautionary notes to sound. While the impending robust competition from omnipresent multinational corporations with diverse product mix such as Xiaomi (1810:HK) threatens the firm's immense niche, another risk factor comes from possible consumption upgrade in the target markets. It is pretty safe to say that Transsion has no advantage in higher-priced segments, where the concept of the ‘global brand’ plays a crucial role.
Entering new consumer electronics submarkets such as household appliances, powered by the ‘Internet of Things’ (IoT), and wearables will be vital for Transsion in the future. It is a quite complicated question whether the company is able to gradually improve and diversify its product line, following economic development trends on the continent. The stiff rivalry is what awaits it outside the ‘comfort zone’ – a low-margin smartphone business. Therefore, betting on the Shenzhen-based manufacturer doesn’t necessarily equal betting on Africa’s future.
Read more about the new Shanghai sci-tech venue in the recent EqualOcean report (download).