Produced by | Bullet Finance

Art Editor | Qianqian

Reviewer | Songwen

In 2006, Zhu Zhaojiang led his team out of the Bird phone era and into Africa. Armed with down-to-earth ideas—four SIM cards with four standby modes, ultra-long battery life, and dark-skin beauty enhancement—he turned Transsion, an obscure Chinese brand, into the "King of African Phones." At its peak, the company commanded over 60% of the local market share.

For more than a decade, Transsion rode low prices, channel advantages, and deep localization of demand to what amounted to an effortless win in emerging markets.

That is, until 2025, when a wave of memory chip price hikes pierced straight through this "low-price king's" armor. Transsion Holdings suffered its first annual profit halving since listing, with gross margin falling to a historic low.

The scale advantage it had prided itself on most became a heavy burden once costs rose.

On the evening of October 30, Transsion Holdings released its Q3 2026 report. Although revenue and net profit maintained an upward trend, growth slowed markedly compared with the strong first half. In the third quarter alone, both revenue and net profit declined.

Bullet Finance noted that over the past two years, in response to cyclical changes, Transsion appears to have tried every method available—raising end-product prices to pass on costs, stockpiling on a large scale to lock in costs, and betting on premium and AI. But behind all this, the company has also paid a price.

In today's cyclical winter, are Transsion's three axles a life-saving remedy or a stopgap measure?

1. Raising Prices to Survive the Winter: Preserve Share or Preserve Profit?

To understand Transsion's current passive situation, one must first understand the logic of its origins.

For a long time, Africa was, in exporters' terms, a low-price market—not the first choice for corporate brands expanding overseas.

In 2006, Zhu Zhaojiang left Bird Mobile, then known as "the domestic phone leader of China's feature phone era." After leaving, he replicated Bird's experience in China's lower-tier markets into the even more rudimentary African market and founded Transsion.

Relying on a cost-effective route emphasizing channels and marketing, as well as ideas with low technical thresholds but extremely high market-insight thresholds—four SIM cards with four standby modes, ultra-long battery life, and dark-skin imaging algorithms—Transsion surpassed Samsung in 2018 and once captured over 60% of the African market.

The core of this model was making money from the demographic dividend, replacement cycles, and extreme cost control in emerging markets. The underlying logic of profit growth came from economies of scale rather than technological premiums.

Its fragility lay precisely there: once the upstream supply chain experienced sharp price increases, the company's profit margin would be the first to be pierced.

This round of impact began to appear in the second half of 2025.

With the explosion of AI computing demand, global memory capacity shifted toward high-profit, high-end products such as HBM, and consumer-grade memory chips entered a rare round of price increases.

TrendForce data shows that in Q1 2026, general-purpose DRAM contract prices rose 93%–98% quarter-on-quarter, and NAND flash rose 55%–60% quarter-on-quarter. The institution also expects DRAM to maintain a 58%–63% quarter-on-quarter increase in Q2, with NAND's increase raised to the 70%–75% range.

(Image / Transsion Holdings prospectus)

At the device level, the memory cost of mainstream phones has multiplied several times from the cycle low, and low-priced models have nearly fallen into a situation of "losing money on every unit sold."

Facing continuously rising costs within the cycle, Transsion chose in 2025 to first protect market share and postpone price increases. Its prospectus explicitly notes that at the time, the industry had not generally passed cost pressure on to end consumers, and the company chose to wait for the industry as a whole to complete price adjustments rather than being the first to break the price system.

But the cost of adhering to a low-price strategy was that Transsion Holdings delivered the "ugliest" annual report since listing.

Financial reports show that in 2025, the company's full-year revenue was 65.591 billion yuan, down 4.55% year-on-year; net profit attributable to shareholders was 2.581 billion yuan, plunging 53.49% year-on-year—the first annual profit halving since listing.

Gross margin fell to 19.15%, a low since listing, and net margin nearly halved from about 8.15% in 2024 to 3.97%. Full-year phone shipments fell from 201 million units to 169 million units, down 16% year-on-year, ultimately falling into the dilemma of losing both volume and profit.

(Image / East Money)

Entering 2026, Transsion finally decided to initiate price increases while actively moving its product mix upward. On the product side, the company began shrinking its sub-$100 entry-level product line in the second half of 2025, and the share of products in the $200 price band increased significantly.

Prospectus data shows that in the first four months of 2026, Transsion's average smartphone selling price rose from 538.8 yuan in the same period last year to 705.5 yuan, an increase of about 31%, with the average price per unit rising by more than 100 yuan.

The effect of price increases was concentrated in the first half of 2026. In the first half, the company achieved revenue of 35.431 billion yuan, up 21.85% year-on-year; net profit attributable to shareholders of 1.773 billion yuan, up 46.22% year-on-year; net profit after deducting non-recurring gains and losses of 1.480 billion yuan, up 64.98% year-on-year; gross margin also recovered from 20.09% in the same period last year to 22.63%, with profit repair faster than revenue.

But during the same period as price increases, the company's market share also declined significantly. Omdia data shows that in Q2 2026, Transsion's smartphone market share in Africa was 47%, down 4 percentage points from the same period last year—the largest decline among the top five manufacturers.

More alarming is that the support for "price increases" decayed rapidly in the third quarter. In the third quarter alone, the company's revenue was 14.849 billion yuan, down 27.45% year-on-year; net profit attributable to shareholders was 857 million yuan, down 8.40% year-on-year; net profit after deducting non-recurring gains and losses was only 436 million yuan, plunging 47.72% year-on-year and nearly halving quarter-on-quarter.

But accumulated over the first three quarters, revenue grew only 1.49% year-on-year, with the high growth of 21.85% in the first half almost erased by a single quarter; net profit attributable to shareholders was 2.63 billion yuan, up 22.44% year-on-year, with growth notably slower than the half-year report.

In addition, non-recurring gains and losses became an important "stepping stone" for profit. The Q3 report shows that non-recurring gains and losses in the third quarter totaled 421 million yuan, accounting for about 49% of net profit attributable to shareholders in the period. Pre-tax gains and losses from holding and disposing of financial assets and financial liabilities alone reached 465 million yuan. Excluding this portion of gains, the company's main business profit in the third quarter nearly halved.

It can be seen that from the impressive repair in the first half to the sharp turn in the third quarter, the marginal effect of Transsion Holdings' price increases is rapidly fading.

2. Borrowing Rises Amid Stockpiling, Yet the Company Still Insists on Large Dividends

In addition to price increases, another strategy for Transsion to cope with memory price hikes is stockpiling.

The company's inventory scale climbed from 8.903 billion yuan at the end of 2025 all the way to 18.935 billion yuan at the end of June 2026, doubling in half a year; although inventory fell somewhat in the Q3 report, it was still as high as 17.319 billion yuan, up 94.5% from the beginning of the year.

The direct effect of this strategy was stabilizing the gross margin level. Most of the products shipped by the company in the first half of 2026 consumed memory chips stockpiled during the low-price period of 2025, with costs locked at a low level while selling prices were raised with the market, driving gross margin from 19.47% in Q3 2025 all the way up to 22.64% in Q3 2026.

(Image / Tuchong, based on VRF agreement)

Against the backdrop of cost pressure across the industry, the resilience of gross margin largely came from the time-difference dividend of advance stockpiling. However, the cost of stockpiling is also very obvious—Transsion Holdings' capital chain continues to come under pressure, and turnover efficiency has also fallen sharply.

High inventory also directly lengthened the capital occupation cycle. Based on a static calculation of single-quarter operating costs, Transsion's inventory depletion cycle lengthened significantly from 52 days in Q3 2025 to 137 days in Q3 2026, more than doubling.

Simply put, previously goods in the warehouse could be sold in less than two months; now it takes four and a half months—money sits on goods for longer and longer.

In addition, the cost of spending money on stockpiling is also reflected in the company's "wallet." In the first three quarters of 2026, the company's net cash flow from operating activities was a net outflow of 9.873 billion yuan, compared with a net inflow of 3.285 billion yuan in the same period last year, turning sharply negative year-on-year. By quarter, the net outflow was 4.094 billion yuan in Q1, 1.767 billion yuan in Q2, and 4.012 billion yuan in Q3, maintaining a net cash outflow of billions of yuan for three consecutive quarters.

Breaking it down, in the first three quarters the company paid 59.395 billion yuan in cash for goods and services, 14.319 billion yuan more than the same period last year; but cash received from sales of goods and services in the same period increased by only about 3 billion yuan year-on-year.

Continuous stockpiling consumption is also "eroding" the company's cash reserves. Monetary funds fell from 11.740 billion yuan at the beginning of the year to 7.843 billion yuan, and trading financial assets shrank from 10.735 billion yuan to 4.698 billion yuan; at the same time, short-term borrowings increased from 1.862 billion yuan to 4.571 billion yuan, and non-current liabilities due within one year also rose from 93 million yuan to 601 million yuan. The company began to add leverage to support its stockpiling strategy.

Interestingly, while operating cash flow continued to flow out in large amounts and stockpiling consumed substantial funds, Transsion's cash dividend pace did not slow.

According to the company's profit distribution announcements, from 2023 to 2025, Transsion's total cash dividends were 4.839 billion yuan, 3.421 billion yuan, and 1.948 billion yuan respectively, with cumulative dividends of 10.208 billion yuan over three years, accounting for 87.4%, 61.6%, and 75.5% of net profit attributable to shareholders in those years respectively, with the dividend ratio always maintained at a high level.

(Image / Tuchong, based on VRF agreement)

In mid-2026, the company still planned to distribute a cash dividend of 8 yuan per 10 shares, totaling 921 million yuan, accounting for 51.93% of net profit attributable to shareholders in the first half—and that was precisely the stage when operating cash flow had a net outflow of more than a billion yuan in the second quarter.

The prospectus discloses that Transsion Holdings' largest shareholder is Transsion Investment Co., Ltd. (holding 46.71% before the Hong Kong listing). Founder Zhu Zhaojiang indirectly controls 46.71% of the listed company (before the Hong Kong listing) and is the actual controller by holding 20.68% equity in Transsion Investment and binding concerted action persons to collectively control 67% of voting rights in Transsion Investment. Based on this equity ratio, a rough estimate shows that over the past three and a half years, the listed company's dividends have brought him more than 1 billion yuan in cumulative gains.

On one side is the funding pressure and rising liabilities brought by stockpiling; on the other is continued high-ratio dividends. This has also become a rather controversial part of Transsion's cycle response strategy.

3. Betting on Premium and AI: Can "Distant Water" Quench Immediate Thirst?

After the low-price volume route hit a bottleneck, Transsion placed the hope of a long-term breakthrough on premiumization and AI transformation, and a Hong Kong listing was also a key step in the strategy.

On December 2, 2025, Transsion submitted its H-share listing application to the Hong Kong Stock Exchange for the first time, and on October 15 this year, the company officially listed on the Main Board of the Hong Kong Stock Exchange.

(Image / Tuchong, based on VRF agreement)

In the prospectus, Transsion clearly defined two transformation mainlines. On the product side, it will shrink entry-level models of TECNO and Infinix and allocate more resources to mid-to-high-end products in the future. Revenue growth in the first half of 2026 benefited from this.

The other is that the prospectus originally estimated net proceeds from the global offering of about HK$3.118 billion, and planned to use 40% of it, about HK$1.247 billion, for AI-related technology R&D. The final allotment results show that the company actually raised net proceeds of about HK$2.968 billion; if the use ratio remains unchanged, the corresponding AI R&D funds would be about HK$1.187 billion, of which 20% would be used to strengthen mobile internet services and IoT products.

In its 2026 half-year report, Transsion officially proposed for the first time that it would "transform AI technology into differentiated product competitiveness," stating that it "will strengthen resource investment in the AI track and deeply integrate AI technology into the entire chain of product R&D, user services, and ecosystem building." The company is attempting to use AI to connect all its hardware products and build new competitive barriers.

On the whole, the company has launched a breakthrough battle of "AI + premiumization." But the capital market is clearly cautious and wait-and-see toward expectations for this transformation.

This can be seen from its Hong Kong IPO financing. Transsion Holdings' issue price was set at the lowest end of the offering range at HK$35.30, and the international placing subscription multiple was only 2.55 times. You should know that in the first eight months of this year, among 103 new stocks, nearly half had international placing subscriptions exceeding 10 times.

In addition, as of November 12, Transsion's H-share (HK2636) stock price was still hovering near the issue price, at HK$38.91 per share, failing to develop an independent market conditions.

The market's caution is not without reason. The practical difficulties facing Transsion's premiumization and AI transformation are hard to overcome easily.

Currently, the intensity of competition in the high-end market far exceeds that of the entry-level market. Africa, as one of the few mobile phone markets globally that still has growth, is becoming a must-contest battlefield for all manufacturers.

(Image / Transsion Holdings official website)

According to Omdia data, Samsung's shipments in Africa in Q2 2026 grew 15% year-on-year, with share rising to 22%, the largest increase on the list; Honor's shipments were 900,000 units, with a 5% market share, up 13% year-on-year. Compared with the same period last year, shipments increased by 100,000 units.

Xiaomi's shipments in Q2 this year were 1.9 million units, with an 11% market share, down 30% year-on-year. However, according to Caijing Tianxia citing informed sources, Xiaomi established a special strategy group internally this year to benchmark Transsion. Xiaomi officials have not yet responded to this.

In the mid-to-high-end price band, these competitors have greater advantages in brand accumulation and technology reserves. For Transsion to upgrade from a 'low-priced and easy-to-use' user perception to high-end recognition will require a long cultivation period.

And from the scale of current R&D investment, from 2023 to 2025, Transsion's R&D investment gradually increased from 2.256 billion yuan to 2.95 billion yuan, and the R&D expense ratio rose from 3.6% to 4.5%, with steady growth but a not-high base.

Compared with peers in the African market, Xiaomi's R&D investment in 2025 reached 33.1 billion yuan, with an R&D expense ratio of 7.2%, far exceeding Transsion in both absolute scale and investment intensity. In this Hong Kong stock fundraising, the AI R&D funds spread to each year average only about 200 million yuan (total/annual), which is closer to a supplement to daily R&D rather than disruptive strategic investment.

In addition, at present, the main consumption range in the African market is still concentrated in the low-to-mid-end. Advancing premiumization in a market with limited overall purchasing power is itself subject to rigid constraints on market space.

From the 'king of African phones' to pushing into high-end and AI, Transsion's transformation seems more like an active choice under passive pressure. It is just that the cold winter of the storage cycle is still continuing. In the 'three-axe' strategy, the marginal effect of price increases is weakening, the cost of stockpiling is gradually emerging, and the story of high-end and AI still needs more time to verify its quality.

*The cover image in the article is from: Transsion Holdings official website.