Transsion sells 3 in 10 phones on the continent. The flip side: threats of civil war.
No matter how many phones you sell, Yu Weiguo has learned, it’s tough to keep to a schedule when the government declares martial law. During his eight years in Ethiopia, Yu has helped turn little-known Transsion Holdings, owner of the sleepy Chinese brand Tecno Mobile, into Africa’s leading mobile device maker. Having sold at least 200 million phones on the continent, he picked the outskirts of Addis Ababa, Ethiopia’s capital, as the site for a 280,000-square-foot factory. It was supposed to be pumping out as many as 2 million phones a month by July, but things aren’t working out as planned.
Ethiopia’s ruling coalition declared a state of emergency in mid-February after the surprise resignation of Prime Minister Hailemariam Desalegn destabilized the rest of the autocratic regime. For Transsion, the fallout has been a lesson in risk. The company profits from China’s checkbook diplomacy in Africa but now faces the downside: public outcry against worsening inequality and repression. “There are many things that can’t be controlled in Africa,” Yu says. “Sometimes your plans don’t work.”
To say Transsion and its phones are little-known outside Africa is an understatement. Tecno has never cracked the top-10 smartphone brands in China and doesn’t sell in the U.S. or Europe. Yet its parent accounts for 30 percent of African phone sales, compared with 22 percent for second-place Samsung, according to researcher Canalys. Reclusive founder Zhu Zhaojiang controls the private company via a string of related backers and funds, as well as some government-backed investment. Zhu, 44, has said he plans to go public at some point through a reverse mergerwith Shimge Pump Industry Group, a Chinese manufacturer of stainless steel pumps.
Transsion’s rise in Africa comes at a time when the continent is undergoing rapid transformation, owing significantly to the convergence of technology, trade, urbanization, and a huge swing in Chinese investment, including $60 billion since 2016. “What Transsion embodies is a kind of reading of the Chinese state, which beginning in the 1990s saw the opportunity that Africa represented,” says Howard French, author of China’s Second Continent: How a Million Migrants Are Building a New Empire in Africa. “Transsion had a discipline and stick-to-itiveness that allowed it to achieve results.”
The company’s origins were humble. Founded in 2006, it built its African business on cheap hardware and software tailored for customers who’d long gone underserved by companies from the U.S., Europe, and Japan. At Transsion’s first assembly line in Ethiopia, Yu and five other Chinese expats slapped together phones on the ground floor of a three-story villa in the center of town. “The place was very small, but we had everything we needed to produce a cellphone,” he recalls.
Yu sold his first couple thousand Tecno flip phones in bulk to local resellers. He charged at least 10 percent less than rivals in the $20 to $50 range, according to analysts’ estimates, and promised to handle customer service, including repairs. Within a few months, as demand hit the tens of thousands, he moved production from the villa to a proper factory and began focusing on custom features.
Transsion added slots for multiple SIM cards and made it easier for customers to toggle between wireless networks, saving money. Chinese engineers developed camera software that could better register darker complexions. A lack of electricity infrastructure shifted the focus toward longer battery life. “These are what you call micro-innovations,” says Arif Chowdhury, an early Transsion staffer who now oversees expansion in Latin America, India, and Southeast Asia. “What made us different was that, from early on, we made a product just for the Africa market.” The company says it has about 5,000 staffers in Africa, and Chowdhury says more than 90 percent of them are locals.
The company expanded across Africa and into higher-end models. Today, it’s no longer perceived as only a knockoff. In the Tanzanian city of Moshi, Tecno owner Nicodemas Gobre says he spent $160 for the Camon CX’s strong camera, battery life, and air of trendiness. Now 1 in 6 people on the continent is a customer, and Transsion’s success has helped draw in Huawei and Xiaomi, China’s star domestic phone brands. “Tecno is changing the narrative that Africans can’t afford smartphones,” says Mbwana Alliy, a venture capitalist whose Savannah Fund focuses on local internet startups. “Facebook, WhatsApp, Instagram—all those apps owe a lot of their success to Tecno,” he says.
In Ethiopia it’s less clear if Transsion will benefit from growing demand for representation among the country’s largest ethnic groups, the Oromo and Amhara, or whether the company—having built its business under the oppressive regime—will suffer from perceptions of coziness. “I find it quite incredible how China agencies, investors, and governments continue to promote Ethiopia as an investment destination,” says Gamechu Ibrahim, an activist in Oromia. “Think twice.”
Yu doesn’t see it that way. He argues that Transsion is bringing mobile and internet connection to the country and hiring and training locals, which all helps economic growth. “Political stability is a huge concern,” he says, but he’s optimistic. He says Transsion is investing for the long term, and the new Addis Ababa factory could be running by August, regardless of who’s running the country.
Jean-Pierre Cabestan, co-author of Tanzania-China All-Weather Friendship in the Era of Multipolarity, says Tecno would be wise to pay closer attention to politics. “The Chinese government and companies in general only establish ties with the ruling government. They engage little with opposition parties,” he says. “That could be a problem down the road.” —With Yuan Gao
By
Lulu Yilun Chen
