The Chinese phone giant that beat Apple to Africa

One of China's biggest smartphone makers has never sold a handset in the country. Yet thousands of miles awa...

Posted: Oct 11, 2018 10:22 AM
Updated: Oct 11, 2018 10:22 AM

One of China's biggest smartphone makers has never sold a handset in the country. Yet thousands of miles away, it dominates markets across Africa. Unknown in the West, Transsion has left global players like Samsung and Apple trailing in its wake in a continent that's home to more than a billion people.

In cities like Lagos, Nairobi and Addis Ababa, busy streets are awash with the bright blue shopfronts of Transsion's flagship brand, Tecno. In China, the company doesn't have a single store, and its towering headquarters in the southern megacity of Shenzhen goes largely unnoticed among skyscrapers bearing the names of more famous Chinese tech firms.

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The company took a different path to success from other top Chinese smartphone makers such as Huawei and Xiaomi, which started out in China before eventually expanding overseas.

Transsion built its business in Africa. And it has no plans to come home.

The perfect selfie

In Edna Mall on the bustling Bole Road in Addis Ababa, the capital of Ethiopia, Mesert Baru poses for her Tecno Camon i. "This phone is seriously nice for selfies," says the 35-year-old shop assistant, admiring the picture she just took.

Mesert's satisfaction is no accident. Tecno cameras have been optimized for African complexions, explains Arif Chowdhury, vice president of Transsion. "Our cameras adjust more light for darker skin, so the photograph is more beautiful," he says. "That's one of the reasons we've become successful."

Transsion founder George Zhu had spent nearly a decade traveling Africa as head of sales for another mobile phone company when he realized that selling Africans handsets made for developed markets was the wrong approach.

His timing could hardly have been better. By the mid-2000s, the Chinese government, under its "Going Out" strategy, was encouraging entrepreneurs to look abroad and forge stronger ties with African nations in particular. Cell phones were spreading rapidly in China, but in Africa — which has a roughly similar population — they were still a very rare luxury.

Africa, in other words, could be the new China.

Giving consumers what they want

In 2006, Zhu launched Tecno in Nigeria, targeting Africa's most populous nation first. From the start, the company's motto was "think global, act local," which meant making phones that met Africans' specific needs.

"When we started doing business in Africa, we noticed people had multiple SIM cards in their wallet," Chowdhury says. They would awkwardly swap the cards throughout the day to avoid the steep charges operators would levy for calling different networks, says Nabila Popal, who tracks the use of devices in Africa for research firm IDC. "They can't afford two phones," says Chowdhury, "so we brought a solution to them." Zhu made all Tecno handsets dual SIM.

More innovations followed. Transsion opened research and development centers in China, Nigeria and Kenya to work out how to better appeal to African users. Local languages such as Amharic, Hausa and Swahili were added to keyboards and phones were given a longer battery life.

Extra juice was important. In Nigeria, South Africa and Ethiopia, for example, the government frequently shuts off electricity to conserve power, leaving people unable to charge their phones for hours. In less developed markets, such as the Democratic Republic of Congo, Chowdhury says, consumers might have to walk 30 kilometers to charge their phone at the local market -- and have to pay to do so. "For those kind of consumers, longer battery life is a blessing," he adds.

Sewedo Nupowaku, the Lagos-based CEO of entertainment company Revolution Media, says he switched from a Samsung S3 to a Tecno L8 for this reason. "I can spend 24 hours constantly talking, browsing on this phone, no problem. With a Samsung, no way."

But perhaps Transsion's smartest move was its pricing. It has three main brands: Tecno, Infinix and Itel. Most of their feature and smartphones sell for between $15 and $200.

Mesert says she bought her Tecno smartphone for 2,000 birr ($72). At a shop near her workplace, an iPhone 7 costs the equivalent of $906, and a Samsung Galaxy J7 around $360. Average monthly wages in Ethiopia range from 1,500 birr ($54) to 3,000 ($108) birr, and most vendors across Africa don't allow customers to pay in installments.

"About 95% of Transsion smartphones cost under $200," says Mo Jia, an analyst at technology research firm Canalys. "They are the king of the budget smartphone."

Tecno: 'We are African'

Less than a decade ago, Chinese phones were barely on the radar in Africa. In 2010, Nokia and Samsung (SSNLF) dominated sales across the continent. By the first half of this year, Nokia's share of the market had collapsed and Samsung was selling only one in 10 phones. Transsion had come from nowhere to take more than 50% of the market, according to Canalys. For smartphones alone, it accounts for nearly a third of all sales in Africa, according to IDC.

Apple (AAPL) has been complacent about African markets, Jia says, because it deemed the slim profit margins on low-cost phones not worth fighting for. Transsion, on the other hand, is happy to work with tight margins, he adds. Apple didn't respond to requests for comment.

Transsion's rise reflects the wider role Chinese firms now play in providing the technology people across Africa use to communicate, including the high-speed internet networks on which smartphones rely. Despite security concerns in countries such as the United States and Australia about Huawei and ZTE, Jia expects demand for Chinese products to remain strong in Africa, where governments and consumers are so price sensitive.

In its marketing, Transsion plays down its Chinese roots. "In Africa, we say that we are African," Chowdhury says, explaining why Tecno's stores carry no Chinese characters or signs of being a Chinese brand. In the 2017-2018 Brand Africa 100 report, published by African Business magazine, Tecno ranked as the 7th most admired brand in Africa. That was up from 14th the previous year, but it still lagged Samsung (2nd) and Apple (5th). The iPhone is still considered a luxury product that many Africans aspire to own.

In Ethiopia, Transsion went a step further to assimilate. Since 2011, every phone it sells in Africa's second most populous nation has been assembled at its facilities in the suburbs of Addis Ababa. About 700 workers piece together Shenzhen-manufactured screens, circuit boards and batteries to churn out 2,000 smartphones and 4,000 feature phones a day.

Transsion says it has a total of 10,000 local employees in Africa, and 6,000 in China. Its low-cost African workforce helps it keep down prices, according to Jia. It also adds appeal for some consumers. "I like that my phone is made in Ethiopia," Mesert says.

A homegrown rival to Spotify

Nigeria, with its population of 186 million, is Transsion's biggest market. It has connected with consumers there through one of their biggest passions: music.

Oye Akideinde, an amateur rapper turned software developer, was recruited by Tecno in 2015 to launch a music app called Boomplay, a homegrown rival to iTunes or Spotify. Most Nigerian internet users grew up illegally downloading music or streaming it for free on YouTube, according to Akideinde, a 40-year-old Lagos resident.

Tecno's vision was to attract music lovers by uniting African and international artists on a single platform offering affordable downloads and streaming with advertising. It preloaded the app onto every Tecno smartphone and made it the default music player. The app now has 32 million users.

Tecno spun off Boomplay and its apps division into a new company, TranssNet, last year. Backed by NetEase, a $30 billion Chinese internet company, TranssNet plans to introduce a suite of financial apps on smartphones made by Transsion.

Chinese companies have been eager to use technology to tap into Africans' spending habits. In 2015, Kenyan mobile payments operator M-Pesa migrated all of its 12.8 million subscribers to Huawei's Mobile Money platform as it expanded across East Africa and beyond. The move increased the number of transactions M-Pesa could process, and the app's user base has more than doubled since then.

Expanding in India and beyond

For Transsion, future growth is set to come from building its business outside Africa in other developing markets, such as Russia, Indonesia and Bangladesh. In 2017, it launched Tecno in India and within a year had claimed 5% of the huge market, according to IDC.

How did Tecno make such rapid progress? Transsion's Chowdhury says another innovation tailored to local customs has helped.

"Indian people use their hands to eat food," he says, "so their fingers get oily. What if you're having lunch and your boss calls? You try to take the call but your fingerprint won't work."

The fix: screens that can read greasy fingers.

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