when it comes to transmission holdings (688036.SH), many domestic consumers must be unfamiliar with this enterprise, but this Chinese enterprise, with its brands TECNO, itel and Infinix, has a pivotal market position in Africa and is called "the king of Africa".

red star capital bureau noted that recently, transmission holdings released the 2023 results express. It is reported that in 2023, Chuanyin sold more than 9400 million smartphones, with a total revenue of 62.392 billion yuan, an increase of 33.9 percent over the same period last year, and operating profit increased by 122.55 percent to 6.748 billion yuan.

With this sales volume, Chuanyin has become the world's fifth largest mobile phone manufacturer in one fell swoop, and this "king of Africa" from China has received widespread attention from the market.

Data map according to Visual China

(I)

First global top five

In recent years, the global smartphone market has continued to be cold, and the industry dividend has gradually disappeared. In this context, the shipments of mobile phone manufacturers have also continued to decline. Not only are the development of small and medium-sized enterprises difficult, but the life of the industry's leading companies is also difficult.

By 2023, winters will be even colder for the global smartphone industry.

According to IDC, global smartphone shipments fell 3.2 year-on-year in 2023 to a total of 1.17 billion units, the lowest in a decade.

Major handset manufacturers also face significant challenges in shipments in 2023. Shipments of Samsung, Xiaomi and OPPO, which ranked second, third and fourth in shipments in 2023, fell 13.6 percent, 4.7 percent and 9.9 percent year-on-year, respectively. Apple, which ranked first, achieved positive growth, but its annual shipment growth rate was only 3.7 percent.

on the other hand, Chuanyin shipped 94.9 million mobile phones worldwide in 2023, up 30.8 percent year-on-year. this is the only manufacturer in the TOP 5 list with a double-digit year-on-year growth rate. at the same time, Chuanyin ranks among the top five smart phone manufacturers in the world for the first time.

It is clear that 2023 will be a "bumper" year for Transmissions.

It is worth mentioning that on January 27 this year, according to the "Shanghai Securities News" report, Chuanyin issued the "Notice on the Method of Issuing the 2023 Year-end Bonus of Chuanyin Holdings." The notice shows that based on the company's overall operating performance exceeding the budget in 2023 and a relatively high year-on-year growth, the company's management has determined that the company's performance coefficient is 1.3, I .e. all employees will receive 30% more year-end bonus on the basis of normal accounting year-end bonus.

as for the reasons for the performance growth, Chuanyin said that the company continued to explore emerging markets and promote product upgrading, and the overall shipment volume and sales revenue increased; at the same time, benefiting from the upgrading of product structure and cost optimization, the overall gross profit margin increased, and the corresponding gross profit increased.

(ii)

How the King of Africa was born

As a Chinese company, how did Transsion sell its products to Africa and continue to expand its market to become the fifth largest company in the world?

Chuanyin was founded in 2006, and its founder Zhu Zhaojiang once worked for waveguide mobile phone.

In 2008, Transsion positioned Africa and launched its brand strategy. The reason for choosing Africa is also very simple. The local population is large but the mobile phone penetration rate is low.

According to the 2006-2007 African Telecom Market Research Report provided by Shuiqingmuhua Research Center, the local mobile phone penetration rate was only about 9.4 percent at that time.

since then, transmission has launched a mobile phone brand called TECNO in Africa. later, it has launched itel, which focuses on cost performance, and Infinix, which focuses on young users.

by 2015, according to IDC data, the sales volume of voice mobile phones has become the second in Africa, second only to Samsung. By 2017, Transsion had become the "king of mobile phones" in Africa, with a market share of 45.12 per cent.

according to the latest data, the shipment volume of transmission in Africa reached 34.5 million units in 2023, with a market share of 50%, up 8% year on year. Samsung ranked second with 17.7 million units shipped and a market share of 26%, down 12% year on year. It can be seen that Transmission is in an absolute leading position in the African market.

Why Transsion can win a big victory in the African market needs to start with the localization of Transsion.

Zhu Zhaojiang once said in an interview with the media: "African consumers have different habits from Chinese consumers. If they make mobile phones with the characteristics of treating Chinese consumers, they will definitely not be able to get into the African market."

transmission has launched four-card mobile phones for the African market and music mobile phones with large headphones at random. these products have hit the pain points of African consumers, thus selling well.

At the same time, due to the relatively backward economic level in Africa, Chuanyin has been attracting local consumers with low prices and high cost performance in order to seize the market. The average price of functional machines sold fluctuates around 60 yuan, while the average price of smart machines is less than 500 yuan.

In general, the reason why Chuanyin can become the "king of Africa" is that on the one hand, the company has done a good job of localization at the product level, on the other hand, the price is close to the people and the cost performance is high.

However, lower prices also make corporate products more sensitive to cost fluctuations and lower overall risk resistance.

(iii)

out of Africa

After its success in Africa, Transcom also wants to replicate this strategy in more regions.

public information shows that in 2015, transmission decided to go deep into Southeast Asia and South Asia. In January 2015, Chuanyin entered Indonesia; in April 2016, Chuanyin officially announced its entry into India; in July 2017, it entered Bangladesh, and in September it was Nepal; at the same time, Chuanyin was deployed in Latin American countries such as Colombia and Mexico.

According to Transsion's 2023 semi-annual report, Transsion's mobile phone products have achieved a high market share in markets such as Africa and South Asia, and have built their own factories in emerging market countries such as Ethiopia, India, and Bangladesh. Global layout of cross-border operations in Africa, South Asia, Southeast Asia, the Middle East and Latin America.

at the same time, according to canalys data, also in the second quarter of 2023, the share of transmission in the Latin American market has reached the fourth. In addition to Africa, Transsion has also become the most sold mobile phone manufacturer in the Philippines, Pakistan, Bangladesh and other markets. Before 2019, the African market contributed more than 75% of the revenue of transmission, but in the first half of this year, this figure decreased to less than 40%.

As for India, the world's most populous country, it has always been a battleground for all. Counterpoint Research data show that the Indian smartphone market fell by 2% in 2023 (fiscal year 2023), with the top five brands in market share being Samsung (18%), vivo(17%), Xiaomi (15%), Realme(12%) and OPPO(10%).

Transsion together accounted for 6.3 percent of the Indian smartphone market in fiscal year 2022, rising to 8.6 percent in fiscal year 2023.

In addition to the mobile phone business, Transsion has expanded its digital accessories, home appliances and mobile apps to open up a second growth curve.

currently, transmission has launched Oraimo, a digital accessory brand, and Syinix, a household appliance brand. it also has many apps such as Boomplay, Vskit, Scooper, Palmpal, AHA game, etc.

Like mobile phones, most of Transsion's accessories and home appliances focus on high cost performance. However, the penetration rate of home appliances in Africa is low. It remains to be seen whether this part of the business can become the second revenue curve of the enterprise in the future.

(IV)

How to deal with market competition

Although Chuanyin has taken its own path in the global market by relying on the differentiation route, the market still has concerns about the future development of the company.

On the one hand, the base camp's business in the African market is approaching the ceiling. On the other hand, in emerging markets such as Asia and Latin America, Transsion needs to face long-rooted domestic competitors, such as Xiaomi, OPPO, and vivo.

From the perspective of R & D investment, after the listing, Transsion's investment in R & D has indeed been increasing.

According to the financial report, from 2020 to 2022, the research and development investment of transmission is 1.158 billion yuan, 1.511 billion yuan and 2.078 billion yuan respectively, increasing year by year. In the first three quarters of 2023, R & D investment reached 1.691 billion yuan, a year-on-year increase of 0.189 billion yuan.

However, compared with the corporate giants, there is still a big gap in the R & D investment of Transsion.

the financial report shows that Xiaomi's research and development investment will be 16 billion yuan in 2022, and the total research is expected to reach more than 100 billion yuan in five years (2022-2026). Huawei's R & D investment in 2022 is about 161.5 billion yuan, and vivo's R & D investment in 2022 is also over 10 billion yuan.

on the other hand, the research and development cost in 2022 is 2.078 billion yuan, accounting for 4.46 of the total revenue. In the case of insufficient R & D investment, the market may have concerns about the core competitiveness of the products in the later stage of the enterprise. After all, the current market competition is fierce, technological innovation helps enterprises to open up the market and become the core moat of enterprises.

In this regard, the sound is also 2023According to the semi-annual report of the year, the technology update cycle of the mobile phone industry is constantly shortening, which puts forward higher requirements for the R & D strength and market response speed of enterprises in the industry. The use of a new technology or the release of a new product may set off a new consumer trend and have a very significant impact on the market competition pattern of mobile phone products. If the company cannot continue to invest in research and development resources, continuously update technology, and respond quickly to the market in the fields of new material research, technological innovation, and process innovation in the future, it will lead to a decline in the company's product sales.

Summary

Generally speaking, in 2023, when the global mobile phone industry is "wailing", Transonic has become the "lucky one". But this is not accidental, thanks to the rational layout of enterprises in terms of differentiated competition and market investment.

However, at the same time, the relatively weak technology research and development capabilities, the changing market demand and consumer demand, and the fierce market competition have also brought more challenges to the transmission.

Red Star News reporter Liu Mi

Editing Yu Dongmei