Transsion Holdings, known as the "King of Mobile Phones in Africa", faces immediate troubles such as patent lawsuits and the CFO being detained. It also confronts future concerns, including premiumization transformation, expansion beyond the saturated African market, and accurate decision-making by management, including Zhu Zhaojiang, for localization in Latin American and South Asian markets.

When it comes to Transsion Holdings, many people may not be familiar with it. However, in overseas markets, especially in Africa, it is virtually a household name. With its three mobile phone brands - TECNO, itel, and Infinix - sweeping across the African continent, Transsion has secured around 40% of the market share, earning the title of the "King of Mobile Phones in Africa".

After quietly amassing a fortune in Africa, the low-key Transsion Holdings has finally encountered a tumultuous period.

From alleged tax evasion in Kenya to a lawsuit from Qualcomm, and then to the detention of CFO Xiao Yonghui, a series of negative news has hit the company. In the capital market, where sentiment was already weak, the barrage of negative news sent Transsion Holdings' share price down by 20% in 2024. From a high of 124.92 yuan per share on April 18 to 71 yuan per share on July 15, Transsion Holdings lost 43% in less than three months, erasing 60 billion yuan in market value. As of press time, Transsion Holdings' market value stood at 87.738 billion yuan.

Troubles persist

Transsion Holdings ascended to the throne in 2023. In the fourth quarter of that year, it ranked fourth globally in terms of mobile phone shipments. Throughout the year, Transsion Holdings secured fifth place in the global smartphone market for the first time, with 95 million units sold and an 8.1% market share.

In the first quarter of 2024, Transsion Holdings once again claimed a top-four position with an 80% growth rate, making it the envy of the industry.

However, just days later, rumors surfaced that Transsion Holdings was being investigated by the Kenya Revenue Authority for alleged tax evasion involving up to USD 3.02 billion. Reports claimed that three officials raided Transsion's headquarters in Nairobi, Kenya, and found evidence of suspected tax evasion.

But soon after, Transsion Holdings issued a denial, stating, "After verification by the company, the report is false and inaccurate."

As the tax evasion incident subsided, news emerged that Qualcomm and other major tech companies had accused Transsion Holdings of failing to reach a patent licensing agreement and allegedly infringing on patents.

Meanwhile, Philips sued Transsion Holdings in India, and companies like Nokia attempted to negotiate licensing agreements with Transsion Holdings.

Before effectively addressing the patent lawsuits, Transsion Holdings risks facing future legal obstacles in court. Transsion Holdings can learn from the mistakes of its predecessor, OPPO. In 2022, Nokia sued OPPO in Germany and emerged victorious, leading to the withdrawal of OPPO phones from German shelves. After paying backdated technology usage fees in 2024, OPPO reached a settlement with Nokia and relisted its apps on German app stores.

Regarding the patent lawsuits, Transsion Holdings has stated that it respects the intellectual property rights of third parties and is willing to reach licensing agreements with patent holders through friendly negotiations. This "friendly negotiation" stance should prevent Transsion Holdings from repeating OPPO's mistake of being pulled from German shelves.

Just when things seemed to be calming down, Transsion Holdings announced a major development on September 6, stating that the Zhen'an District Supervision Commission of Dandong City, Liaoning Province, had issued a "Detention Notice" and "Case Filing Notice," detaining CFO Xiao Yonghui for investigation.

Xiao Yonghui has served as the financial director of Transsion Holdings since 2014, spanning over a decade. Prior to his detention, Xiao Yonghui participated in a research event attended by 284 institutions and 363 individuals on August 28.

Upon the announcement of Xiao Yonghui's detention, the capital market reacted immediately, with the stock price plunging by more than 8% intraday and closing down 4.99% at 77.05 yuan per share, erasing 87 billion yuan in market value.

Hard to get rich quietly

In 2006, Transsion Holdings rapidly grew its business by addressing pain points for African consumers with deep skin tones and supporting features like dual SIM cards and dual standby. CCTV's documentary "The Road to Prosperity" detailed Transsion's "customized" beautification function tailored for the African continent.

By 2018, Transsion phones had surpassed a 48% market share in Africa, officially earning the title of "Number One Mobile Phone in Africa." By the first half of 2024, Transsion's market share in Africa remained above 40%.

However, in recent years, as domestic mobile phone manufacturers like Xiaomi, OPPO, and vivo have ventured into the African market, Transsion's market position has been severely challenged. The notable slowdown in retail growth over the past few years underscores this challenge.

According to "Digital Intelligence Research Institute," Transsion Holdings' performance growth rates in Africa from 2020 to 2023 were 18.14%, 7.95%, -14.87%, and 6.94%, respectively.

Under such circumstances, Transsion Holdings has extended its reach to emerging markets in South Asia and Latin America, where product gross margins are lower than in Africa.

Furthermore, Transsion Holdings' rise to prominence as the king of mobile phones in Africa is largely attributed to capitalizing on the generational gap in the region. The company has ventured from low-end feature phones to high-end smartphones, even recently unveiling the Phantom Ultimate 2, a tri-fold concept phone.

However, in the view of "Digital Intelligence Research Institute," Transsion's move from the low-end feature phone market to the high-end smartphone market is bound to face fierce competition from established players in the smartphone industry. Moreover, companies like Xiaomi, vivo, and OPPO are also expanding into Africa, aiming to capture a share of the market.

The days of Transsion Holdings quietly amassing a fortune are gone. The current Transsion may very well be the best version of itself for years to come.