With supply chain prices on the rise and the global smartphone market stagnating, TECNO struggles to captivate the market with compelling narratives. Its performance and market share oscillate between phone replacement cycles and supply chain pricing trends. The African leader's challenge lies in navigating the industry's shift towards mid-to-low-end products, with its future hinging on the possibilities unlocked by AI integration.

In the first half of 2026, the average selling price of TECNO smartphones rose to 713.4 yuan from 547.5 yuan year-on-year.

However, sales volume dropped from 44.5 million units to 39.5 million units.

Faced with rising prices from upstream supply chain, TECNO has two options: maintain market share or protect profits.

The former requires accepting a decline in profits in exchange for growth in market share. The latter entails accepting a decline in sales volume to safeguard performance.

TECNO has clearly chosen the latter path.

Part.

01

Failed Shock Therapy

The smartphone business is inherently low-margin. When upstream supply chain costs rise, manufacturers face margin compression—a challenge pervasive across the industry.

TECNO is no exception. In 2025, its gross margin fell to 18%, causing its profit to plummet from 5.6 billion yuan to 2.6 billion yuan, a 53% decline, nearly halving its earnings. The direct cause was the rising supply chain costs.

In 2025, TECNO's upstream memory chip costs rose from 13.2 billion yuan the previous year to 14.5 billion yuan, a 10% year-on-year increase. SoC costs increased from 8.2 billion yuan to 9 billion yuan, an 11% rise. In the first four months, memory chip costs accounted for 48% of total costs, and when combined with SoC's 16%, these two components accounted for two-thirds of total costs.

This situation is not unique to TECNO but is an industry-wide phenomenon. In the second quarter of this year, Xiaomi's smartphone business gross margin was only 8.5%, down from 11.5% year-on-year, a 3-percentage-point decline.

The supply chain price hikes have hit manufacturers focusing on low-price segments the hardest.

Breaking free from this predicament is inevitable, as TECNO has proven that a "shock therapy" approach doesn't work.

As mentioned in its prospectus, faced with increased memory chip procurement costs in the second half of 2025, TECNO slowed its shipments. The core reason for this decision was that the industry had not yet passed on these costs to end consumers, opting to wait for industry-wide price adjustments rather than preemptively raising prices.

Without market pricing power, TECNO could only maintain a low-price strategy while competitors held their prices steady. This ultimately led to declines in both revenue and profit. Revenue fell from 68.7 billion yuan to 65.6 billion yuan, a 4.5% year-on-year drop.

The reason is that sustained upstream supply chain price hikes can breach profitability thresholds. Ultimately, selling each unit at a loss becomes untenable, forcing manufacturers to mitigate losses by controlling shipments. This resulted in TECNO failing to gain market share through low pricing, instead experiencing a significant overall sales volume decline due to controlled shipments. In 2025, sales volume dropped from 201 million units to 169 million units, a 16% reduction.

In other words, continuing with low-price competition does not expand market share but instead leads to declines in both revenue and sales volume. Against the backdrop of rising supply chain costs, manufacturers cannot sustain internal competition, making price hikes a common market choice.

In 2026, TECNO raised its prices by over 100 yuan on average. From a performance perspective, compared to the dual decline in sales volume and revenue, price hikes at least ensured revenue stability. In the first half of the year, TECNO achieved dual growth in revenue and profit, with operating revenue reaching 35.4 billion yuan, a 22% year-on-year increase, and net profit attributable to shareholders surging 46% year-on-year to 1.77 billion yuan. The price hikes significantly boosted gross margin, which reached 22.6% in the first half, up 2.6 percentage points year-on-year.

The trade-off was evident. According to Omdia data, in 2026, TECNO's market share in Africa stood at 47%, a 4-percentage-point decline year-on-year, the largest drop among the top five companies.

In the current environment, declining sales volume is a common industry phenomenon. Counterpoint data shows that global smartphone shipments fell 20% year-on-year in the third quarter of this year, marking the worst third-quarter performance since 2012. Major manufacturers have all experienced sales declines.

However, nuances exist within this broader trend. Manufacturers with a higher proportion of high-end models have been relatively less affected, even expanding their market share against the trend. For example, Samsung and Apple increased their global market share by 4 percentage points, while Huawei saw significant growth in its domestic market share.

Manufacturers with a higher proportion of mid-to-low-end models, such as Vivo, OPPO, Xiaomi, and Honor, have been more severely impacted. TECNO, as an even more extreme case, is undoubtedly the hardest-hit manufacturer in this storm, if not the only one.

This is an inherent disadvantage for TECNO, with no opportunity for short-term change.

Part.

02

The Alluring yet Perilous Emerging Market

In 2015, TECNO was still an emerging force in the African market. In the third quarter of that year, TECNO's sales volume in the Middle East and Africa grew by 123%, capturing an 8.2% market share (Source: Counterpoint).

Just a year later, TECNO secured a 38% market share in Africa's smartphone market, becoming the continent's sales champion (Source: IDC).

The understated Zhu Zhaojiang wrote a story of mining gold in emerging markets.

Zhu Zhaojiang is a veteran of the mobile phone industry. In 1996, he joined Bird Mobile. After graduating, he abandoned a technical role and returned to Ningbo to sell pagers for Bird. While others focused on product features, he first asked, "What functions do you need?" At Bird Mobile, he became the top salesperson within three years and was promoted to Chief Sales Representative for Northern China. When Bird transitioned to mobile phones in 1999, he voluntarily requested a transfer to the mobile phone division.

At that time, Bird Mobile was a household name with its slogan "The Fighter of Mobile Phones," consistently ranking first in domestic mobile phone sales for several years, with 11.75 million units sold and 10.8 billion yuan in revenue in 2003. Zhu eventually became General Manager of Bird's Mobile Phone Division and Overseas Business Division.

It was during this period that he forged a connection with the African market.

In 2006, as the smartphone wave surged, Zhu left Bird and, along with several former colleagues, founded TECNO in Shenzhen's Yuehai Street.

The DNA cultivated during the Bird era carried over to TECNO. The principle of "What functions do you need?" became the cornerstone of TECNO's product design.

The African market had numerous network operators, and inter-operator call rates were higher than intra-network rates. Users frequently switched SIM cards to make calls.

During the era of Steve Jobs' minimalist philosophy, where product managers dictated design and consumers ultimately accepted it, smartphone designs often adhered to a "reality distortion field"—non-removable batteries, single SIM slots, and daily charging requirements.

TECNO's philosophy seized a market gap.

In response to the multitude of operators, TECNO introduced dual-SIM dual-standby phones and even quad-SIM phones by 2008, which became wildly popular in Africa. Addressing Africa's unstable power grid and frequent blackouts, TECNO designed phones with dust resistance, long battery life, durability, and sweat resistance. For Africa's dark-skinned population, TECNO developed a deep-skin-tone photography algorithm based on eye and teeth positioning.

In terms of marketing, TECNO plastered wall advertisements in slums and sponsored the Africa Cup of Nations for extended periods.

Facing political instability in African nations, TECNO pursued localization, with over 90% of its R&D, procurement, sales, and after-sales teams in Africa comprising local employees. It established production bases in Ethiopia, Bangladesh, and elsewhere.

To this day, Africa remains TECNO's stronghold, with market share fluctuating but consistently around 50%.

TECNO replicated its African success in other emerging markets. According to its prospectus, TECNO ranked second in sales in emerging Asia-Pacific markets (including Indonesia, Pakistan, the Philippines, India, and Bangladesh) and the Middle East (including Iraq, Saudi Arabia, Turkey, the UAE, and Jordan).

To this day, TECNO has remained confined to the mid-to-low-end and emerging market segments. This strategy was the secret to its success but now acts as a drag.

Part.

03

Trapped in Cycles

According to its prospectus, TECNO's feature phone business declined by 31% in 2025. In the first half of this year, feature phone revenue dropped to 1.5 billion yuan, down another 10%. The decline in feature phones proves that even in less economically developed regions, smartphones have achieved widespread adoption. This means the market lacks fresh growth opportunities.

The future of the smartphone market hinges on unit sales, replacement cycles, channel inventory turnover, and capturing a few extra percentage points of market share. Major manufacturers, including TECNO, are largely locked into cycles of phone replacement and supply chain pricing.

If supply chain prices remain stable, TECNO's fortunes hinge on the timing of the next replacement cycle. When supply chain prices are volatile, TECNO must navigate "winter" and avoid losing market share.

The current supply chain price hikes represent an adverse cycle for TECNO, requiring it to weather the storm as best as possible.

In response, TECNO has taken proactive measures. On one hand, it has aggressively stockpiled inventory. In the first half of the year, TECNO's net cash outflow from operating activities reached 5.86 billion yuan, a significant reversal from net inflows year-on-year. The primary reason was that rising memory prices prompted the company to stockpile inventory, increasing procurement payments. By purchasing in advance, TECNO aimed to mitigate future uncertainties and dilute costs.

On the other hand, TECNO adjusted its product mix. It reduced the launch of entry-level models under TECNO and Infinix, shifting resources to mid-to-high-end segments with the introduction of CAMON Slim and Infinix HOT 70. By targeting higher average selling prices, TECNO aimed to alleviate gross margin pressures and safeguard profits and cash flow.

However, in this adverse cycle, TECNO cannot avoid market erosion.

In 2025, TECNO's revenue in Central and Eastern Europe plummeted 36% year-on-year to 3.56 billion yuan, while Latin American revenue fell 24% to 5.25 billion yuan. Middle Eastern revenue declined 7% to 6.16 billion yuan, emerging and Asia-Pacific markets dropped 4%, and other regions fell 12%. Only the African market saw growth.

Currently, TECNO faces growing competition even in its African stronghold. With global market saturation, emerging markets represent lucrative growth opportunities for all manufacturers. In the first quarter of 2026, Honor's smartphone shipments in Africa reached 1.03 million units, up 101% year-on-year, capturing a 7% market share and vaulting to fourth place. Since 2024, Xiaomi has accelerated its African market expansion, with Lei Jun personally announcing increased investment at the China-Africa Entrepreneurs Conference. Rumors suggest Xiaomi formed a dedicated strategy team to compete with TECNO. Coupled with OPPO, Vivo, Samsung, and other players, TECNO faces mounting competitive pressure in Africa.

In this context, choosing price hikes and focusing on mid-to-high-end segments inevitably cedes some market share. Compared to competitors, TECNO lacks a strong foothold in other markets, making it difficult to offset losses through mid-to-high-end products. This is an extremely brutal defensive battle. The throne of "Africa's Top Player" may soon be usurped amid ongoing market shifts.

Trapped in this cycle, TECNO is also exploring new strategies.

Part.

04

The Temptation of 80% Gross Margins

Like other smartphone manufacturers, TECNO is drawing inspiration from Apple, Xiaomi, and Huawei in its search for new growth avenues.

Beyond smartphones, TECNO offers laptops, tablets, smartwatches, wireless earbuds, power banks, and home appliances. Unlike Xiaomi and Huawei, TECNO has not ventured into electric vehicles but instead introduced electric bikes and tricycles tailored to African markets, along with some energy storage products. The common issue with these businesses is their low margins and limited market opportunities.

Among all its businesses, mobile internet services hold the most promise.

This segment generated only 942 million yuan in revenue in 2025, up 13% year-on-year. However, its gross margin was an impressive 80%, towering over the low-margin hardware business.

This revenue comes from services based on TECNO OS, with clients including third-party app developers and advertisers. Monetization methods include pre-installations, app distribution, advertising displays, and in-app ads. Essentially, these approaches do not deviate from traditional smartphone manufacturer revenue models.

However, the introduction of AI has brought more possibilities to this business.

Among the purposes of Transsion's fundraising through its Hong Kong stock listing, AI technology research and development is placed at the top. There are three main aspects: AI foundational capabilities, AI assistants and AI agents, upgrading Transsion OS, and enhancing imaging capabilities. This is actually centered around mobile internet services. The most ideal model for commercializing AI capabilities is direct charging. However, considering that Transsion, as a hardware manufacturer, mainly provides on-device small models (3 billion parameters) that enable AI to run on low-cost chips, the most feasible approaches are likely to be collaborating with large model platforms, driving traffic to agents, and so on.

This is a crucial part of Transsion's future narrative.

According to the prospectus, as of April this year, the average monthly active users of Transsion OS exceeded 300 million, the average monthly active users of the application distribution platform Palm Store surpassed 200 million, and AHA Games exceeded 140 million. Transsion has also collaborated with internet platforms such as NetEase to develop applications, among which Phoenix has an average monthly active user base of over 150 million.

The key to truly enabling Transsion to break free from cyclical fluctuations lies in its ability to convert its user base into actual revenue.

With rising supply chain prices and intense competition in the global existing market, Transsion struggles to tell a compelling story to the market. Its performance and market share oscillate between the phone replacement cycle and the supply chain price cycle. The challenge for the leader in Africa is to address the industry trend of impacts on the mid-to-low-end market, with the key to success being new ideas empowered by AI.