Just after being caught in a patent infringement dispute with Qualcomm, mobile phone manufacturer Transsion revealed more potential signals in its 2024 semi-annual report.

On the evening of August 27, Transsion Holdings (688036. SH) (hereinafter referred to as "Transsion") released its 2024 interim results, in the first half of the year, Transsion Holdings achieved operating income of 34.56 billion yuan, a year-on-year increase of 38.07%; The net profit attributable to the parent company was 2.852 billion yuan, a year-on-year increase of 35.7%.

It is worth noting that the net cash flow generated by Transsion's operating activities in the first half of the year fell by 120% year-on-year, from 6.959 billion yuan in the same period last year to -1.392 billion yuan.

The net cash flow generated by operating activities is an important financial data that reflects the operating conditions of an enterprise, and is related to various factors such as market environment and industry competition. From the perspective of the consumer electronics industry where Transsion is located, inventory is an important indicator that affects the overall operation of the enterprise. According to the data given in the balance sheet of Transsion's 2024 semi-annual report, its inventory amount was 11.65 billion yuan, a year-on-year increase of 71.81% from 6.781 billion yuan in the same period last year, accounts receivable increased by 56.33% year-on-year to 2.433 billion yuan, and monetary funds decreased by 18.3% year-on-year to 10.449 billion yuan from 12.79 billion yuan in the same period last year.

In other words, in the first half of 2024, the amount of cash available on Transsion's books has decreased, the degree of pressure has increased, and under the cruel competition in the smartphone industry, Transsion has also felt a hint of coolness.

According to the data released by the market research agency Canalys, in the second quarter of 2024, Transsion shipped 255 million units, with a market share of 9%, ranking fifth in the world; In the first quarter of 2024, Transsion shipped 286 million units, with a market share of 10%, ranking fourth in the world. In the first half of the year, both shipments and market share declined sequentially.

Headquartered in Shenzhen, Transsion, which is mainly engaged in the overseas smartphone business, has launched products such as mobile phones with four cards and four standbys, anti-sweat USB interfaces, and camera technology specifically for dark-skinned consumers with insights into local users in Africa. The financial report quoted IDC data as saying that in Africa, Transsion has a market share of more than 40% in the smartphone market.

However, in recent years, Transsion's growth in Africa has shown a weak trend, and after negative growth in 2022, even if there is a certain recovery in 2023, there is still a certain distance from the high. According to the financial report, from 2020 to 2023, the company's revenue from Africa will be 22.452 billion yuan, 24.238 billion yuan, 20.633 billion yuan, and 22.063 billion yuan respectively, with year-on-year changes of 18.14%, 7.96%, -14.88%, and 6.74% respectively. Under these circumstances, Transsion began to expand into global emerging markets such as South Asia, Southeast Asia, the Middle East, and Latin America. In the 2024 semi-annual report, Transsion did not specifically disclose revenue data in emerging markets, but cited IDC data rankings to say that it ranks first in the smartphone market share in South Asia, Pakistan and Bangladesh, and ranks seventh in the smartphone market share in India.

It is not easy to replicate the myth of one's own growth in Africa. Some residents living in Saudi Arabia, the Philippines and other places told Blue Whale News reporters that Transsion has very few physical stores in the local area, and the recognition and popularity are very average. In the financial report, it can be seen that in the first half of 2024, Transsion's sales expenses increased by 42.61% year-on-year to 2.407 billion yuan from 1.687 billion yuan in the same period of the previous year.

In addition to Transsion, some domestic mobile phone manufacturers vivo, OPPO, and Xiaomi have already explored overseas markets. At the performance communication meeting held after Xiaomi released its second-quarter financial report on August 21, Lu Weibing, president of Xiaomi Group, said, "We have historically won the second place for the first time in Latin America, we have stabilized in the second place in the Middle East, and we have returned to the second place in Southeast Asia. "This has a certain degree of overlap with Transsion's main market and new markets, which will intensify the competition.

Reflected in the financial data indicators, the gross profit margin of Transsion in the first half of 2024 will be 21.53%, a year-on-year decrease of 2.01%; Among them, the gross profit margin in the second quarter of 2024 was 20.89%, a year-on-year decrease of 2.76%. Transsion also expressed concern in the financial report that the gross profit margin will be reduced and the profitability will be weakened.

More than a month ago, on July 12, foreign media also reported that Qualcomm sued Transsion in the Delhi High Court in India, Qualcomm said that Transsion recently signed a license agreement with Qualcomm for some of its products, but most of the products have not been licensed by Qualcomm and are still infringing on its valuable patent portfolio.

Transsion's reply at the time was: "We have signed a 5G standard patent license agreement with Qualcomm and are fulfilling the agreement." TRANSSION's sales network covers more than 70 countries in emerging markets such as Africa and South Asia. In these countries, some patentees do not own or only have a small number of patents, but demand excessively high royalties at a globally harmonized rate, without taking into account factors such as differences in the level of economic development in different regions, no patents or only a small number of patents in a particular region or market, and the existence of existing precedents that offer different rates in different regions. We believe that the practices of some patent owners do not fully comply with the principles of fairness, reasonableness and non-discrimination. ”

On

the trading day after the financial report on August 28, Transsion Holdings' share price fell sharply, falling more than 7% intraday, and as of the evening close, Transsion Holdings closed at 79.26 yuan per share, down 5.51%, with a total market value of about 89.5 billion yuan.