Chinese firm making most of Africa’s phones
No matter how many phones you sell, Yu Weiguo has learned, it’s tough to keep to a schedule when the government declares martial law.
During his eight years in Ethiopia, Yu has helped turn little-known Transsion Holdings, owner of the sleepy Chinese brand Tecno Mobile, into Africa’s leading mobile device maker.
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Having sold at least 200 million phones on the continent, he picked the outskirts of Addis Ababa, Ethiopia’s capital, as the site for a 280,000-square-foot factory. It was supposed to be pumping out as many as two million phones a month by July, but things aren’t working out as planned.
Ethiopia’s ruling coalition declared a state of emergency in mid-February after the surprise resignation of Prime Minister Hailemariam Desalegn destabilised the rest of the autocratic regime.
For Transsion, the fallout has been a lesson in risk. The company profits from China’s checkbook diplomacy in Africa but now faces the downside: public outcry against worsening inequality and repression.
“There are many things that can’t be controlled in Africa,” Yu says. “Sometimes your plans don’t work.”
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To say Transsion and its phones are little-known outside Africa is an understatement. Tecno has never cracked the top-10 smartphone brands in China and doesn’t sell in the US or Europe.
Yet its parent accounts for 30 per cent of African phone sales, compared with 22 per cent for second-place Samsung, according to researcher Canalys.
Reclusive founder Zhu Zhaojiang controls the private company via a string of related backers and funds, as well as some government-backed investment. Zhu, 44, has said he plans to go public at some point through a reverse merger with Shimge Pump Industry Group, a Chinese manufacturer of stainless steel pumps.
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Transsion’s rise in Africa comes at a time when the continent is undergoing rapid transformation, owing significantly to the convergence of technology, trade, urbanization, and a huge swing in Chinese investment, including $60 billion since 2016.
“What Transsion embodies is a kind of reading of the Chinese state, which beginning in the 1990s saw the opportunity that Africa represented,” says Howard French, author of China’s Second Continent: How a Million Migrants Are Building a New Empire in Africa.”
The company’s origins were humble. Founded in 2006, it built its African business on cheap hardware and software tailored for customers who’d long gone underserved by companies from the US, Europe, and Japan.
At Transsion’s first assembly line in Ethiopia, Yu and five other Chinese expats slapped together phones on the ground floor of a three-story villa in the center of town. “The place was very small, but we had everything we needed to produce a cellphone,” he recalls.
Yu sold his first couple thousand Tecno flip phones in bulk to local resellers. He charged at least 10 per cent less than rivals in the (Sh2,000) $20 to (Sh5,000) $50 range, according to analysts’ estimates, and promised to handle customer service, including repairs.
Within a few months, as demand hit the tens of thousands, he moved production from the villa to a proper factory and began focusing on custom features.
Transsion added slots for multiple SIM cards and made it easier for customers to toggle between wireless networks, saving money. Chinese engineers developed camera software that could better register darker complexions.
A lack of electricity infrastructure shifted the focus toward longer battery life. The company says it has about 5,000 staffers in Africa with over 90 per cent of them locals. The firm expanded across Africa and into higher-end models.
Today, it’s no longer perceived as only a knockoff. Now one in six people on the continent is a customer, and Transsion’s success has helped draw in Huawei and Xiaomi, China’s star domestic phone brands. Graphics from Bloomberg