Transsion Holdings has released its third-quarter financial report, which shows a decline in both revenue and net profit. Behind this decline, Transsion Holdings is also facing patent lawsuits from Qualcomm, Philips, and Nokia. As global mobile phone brands continue to pour into Africa, the days of easy profits for Transsion Holdings may be over.

Transsion is known as the 'king of mobile phones in Africa.' In Africa, one out of every two mobile phones sold is a Transsion product.

In 2018, Transsion surpassed Samsung for the first time to become the top-selling mobile phone brand in Africa. Since then, Transsion has consistently maintained its leading position every year. In the first half of 2024, Transsion's market share in Africa exceeded 40%, ranking first in the continent.

Beyond the gradually saturated African market, Transsion has set its sights on South Asia and Southeast Asia and has already achieved some success. For example, it is the leading mobile phone brand in terms of market share in Pakistan and Bangladesh, and ranks seventh in India.

Despite the slow growth of the global mobile phone industry, Transsion has continued to grow against the trend. In the first half of 2024, Transsion became the second-largest mobile phone brand globally, with a market share of 14.4%. In terms of shipments, Transsion ranked fifth worldwide with 25.5 million units, surpassing Huawei, Honor, OPPO, and other prominent Chinese brands, and ranking only behind Samsung, Apple, vivo, and Xiaomi.

However, in the third quarter, Transsion Holdings' financial report shocked everyone. Compared to the first half of 2024, which saw a 38.07% year-on-year increase in revenue and a 35.7% increase in net profit, the third quarter saw declines in both revenue and net profit, with net profit plunging by a staggering 41.02% year-on-year.

What happened to the king of mobile phones in Africa?

Behind the surprise performance

Transsion Holdings, the king of mobile phones in Africa, has released a third-quarter financial report showing declines in both revenue and net profit.

The data shows that Transsion Holdings achieved revenue of 16.693 billion yuan in the third quarter, a year-on-year decrease of 7.22%; net profit attributable to shareholders was 1.051 billion yuan, a year-on-year decrease of 41.02%.

The decline in third-quarter performance impacted Transsion Holdings' overall performance for the first three quarters. During this period, the company achieved revenue of 51.251 billion yuan, a year-on-year increase of 19.13%; net profit attributable to shareholders was 3.903 billion yuan, a slight year-on-year increase of 0.5%, which is practically on the verge of loss.

According to "Digital Intelligence Research Society," Transsion Holdings showed signs of slowing revenue growth in the second quarter. Compared to the first quarter's revenue of 17.44 billion yuan, the second quarter's revenue of 17.12 billion yuan showed a sequential decline. Net profit also declined from 1.626 billion yuan in the first quarter to 1.226 billion yuan in the second quarter, a stunning decrease of 24.6% or 400 million yuan.

Given these trends, it was not unexpected that the third-quarter financial report would show declines in both revenue and net profit.

Transsion Holdings attributed the decline in performance to the combined effects of market competition and supply chain costs, resulting in decreased revenue and gross margin in the third quarter.

According to the financial report, Transsion Holdings' net profit margin fell 15.48% year-on-year to 7.69%, and its gross margin declined 13.01% to 21.59% in the first three quarters of 2024. Clearly, the company's profitability is declining.

Behind this decline in profitability lies fierce competition in the African smartphone market. Data from market research firm Canalys shows that although Transsion Holdings still dominates the African market with a significant share, its market share declined slightly compared to the first quarter of 2024. After the disappointing third-quarter performance, "Digital Intelligence Research Society" predicts that Transsion Holdings' market share in Africa will further decline.

The 'thunderous' third-quarter results also impacted Transsion Holdings' performance in the capital market. From a high of 124.92 yuan per share on April 18, the stock price plummeted to a low of 71 yuan per share on July 15, a decline of over 43.1% in three months, erasing more than 60 billion yuan in market value.

Fortunately, with the advent of a bull market, Transsion Holdings' share price rebounded. As of October 30's close, Transsion Holdings' share price was 94.01 yuan, with a market value exceeding 100 billion yuan once again.

Despite the share price volatility, shareholders were actively reducing their holdings to cash out. In May, the controlling shareholder, Shenzhen Transsion Investment Co., Ltd., sold 8.0657 million shares, realizing over 1 billion yuan in cash based on the prevailing share price at the time.

The shareholding ratios of Transsion Holdings' three employee stock ownership platforms have also declined. Based on the prevailing share price at the time, the cash realized from these sales totaled nearly 2.5 billion yuan. As the driving force behind these four companies, Transsion Holdings' founder Zhu Zhaojiang became the biggest beneficiary of these share sales.

Ongoing patent lawsuits

In the smartphone industry, intellectual property and patent lawsuits are frequent occurrences. Many domestic mobile phone brands have faced or encountered intellectual property or patent lawsuits during their operations.

For Transsion, as early as 2019, Huawei initiated legal proceedings against Transsion Holdings for alleged infringement of intellectual property rights.

In January 2024, Philips filed an intellectual property lawsuit against Transsion Holdings in India. The Financial Times also reported that Nokia demanded that Transsion Holdings pay royalties for the patents used in its mobile phones.

In July, Qualcomm filed lawsuits in India and Europe alleging patent infringement by Transsion Holdings. News of these lawsuits caused Transsion Holdings' share price to plummet.

Subsequent responses revealed that Transsion Holdings did indeed use Qualcomm's patents, but Qualcomm maintained that the majority of Transsion's products were not licensed or authorized by Qualcomm and were still infringing upon its patents. Beyond the patent infringement lawsuits, a larger dispute exists over royalty fees. Transsion Holdings hopes to pay lower royalty and intellectual property fees than those paid by brands like Apple and Huawei, which directly impact the company's profits. However, Qualcomm and Philips have been unwilling to accept Transsion Holdings' demands.

In addition to the lingering issues of intellectual property and patent lawsuits, in September, it was suddenly reported that Xiao Yonghui, the company's chief financial officer, was placed under retention measures and investigated by the Zhen'an District Supervisory Committee of Dandong City, Liaoning Province. Although he was soon released from retention, the reason remains unknown, and Transsion Holdings did not mention it in its announcement.

Now, with Transsion Holdings releasing a third-quarter financial report showing declines in both revenue and net profit, it may signal that the days of easy profits for the company in Africa are over, as global mobile phone brands continue to pour into the continent.