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Chinese technology is taking over the telecommunication markets in Africa

Author: LB 2020-09-01 852

These days, I found a very interesting video on YouTube, but it was in Mandarin Chinese and I decided to translate its content into English for those who are interested in Chinese entrepreneurship in Africa. We don’t know too much about Africa, especially because we don’t really travel to this exciting continent. Nevertheless Africa is getting popular among Chinese investors and it will be a hotspot for business and investment in the following years.

So let’s see the content of the video published by 冲浪普拉斯, but first of all let me embed his video here:

What comes to our mind when we think of Africa?

High temperature, savannas, deserts, anarchy, poverty, black people carrying coffins.

In the past 20 years, China seems to have established its bases in this marvelous continent.

For these entrepreneurs Africa means desire, opportunities and wealth.

If we are talking about modern Africa with tourist destinations, undeveloped areas, road and bridge constructions, large advertisements or local mines Chinese businessmen are involved in all of these.

1. Chinese interest in the African mobile phone industry

In today’s Africa, Tecno Mobile(传音) represents Chinese prevalence. This is a company from the Chinese Shenzhen and they entered the African markets in November, 2007 when they started selling mobile phones. In 10 years they defeated Samsung, Ericsson and Nokia too. They conquered Africa at once. In 2018 they achieved something extraordinary. They sold 124 mobile phones. In 2018 Tecno Mobile owned 48.71% of the African markets defeating Samsung and Huawei in the region. With their sales volume in Africa, they have been ranking as the 4th largest mobile phone manufacturer in the world following Apple, Huawei and Samsung. Tecno Mobile has not been a famous manufacturer for most of us, however the wealth they amassed is definitely bringing attention.

2. The initial steps of Tecno Mobile

Everything started when Bodao (宁波波导股份有限公司) started losing its market shares. Mobile phones appeared first at the end of the last century, in the 90’s.

In 1997, Xu LiHua (徐立华) had already been manufacturing beepers when he prognosticated the forthcoming boom of the mobile phone markets. The masses rejected his prophecy, but he did not seem to care too much and invested his money into the manufacturing industries.

With the aid of the local government in ZheJiang the government acquired Bodao and the PRC became its shareholders. With this step they also acquired a pattern to develop the first portable devices in China.

These days, Motorola was the dominant mobile phone manufacturer in China and domestic brands accounted for merely 5% of the whole market. Bodao was in the beeper business and nobody knew how to create these portable devices in their factories and they started searching for ideas in foreign sources.

3. The French appear in China

And then the french Sagem appeared. They were the 6th largest mobile phone manufacturers in the world and they had been looking forward to their intrusion into the Chinese markets since a long time ago, however they never had the chance to enter due to the prevalence of Motorola and Nokia in China.

In 1999, Bodao and Sagem finally signed their mutual agreement. Sagem will provide the core technology and Bodao will be responsible for branding and marketing. They had been working together for 5 months when Bodao came up with the plans of a manufacturing line to mass produce portable devices and they officially started pouring out these new gadgets.

As the French Sagam was originally the supplier of communication equipment for the Dassault Mirage 2000 Bodao started advertising their products with the following slogan in China: “Bodao phones, the jet fighter of mobile phones”. They even hired the well-known Coco Lee (李玟) to make Bodao phones more popular on billboards.

4. Bodao’s huge leaps

Bodao applied for a 40 million CNY loan so that they can advertise their products in the central TV station and with their slogan they conquered the market. In 2000, they sold 700.000 devices in one year and they became the most significant manufacturer in the country. In the following year they overtook the cumulative production volume of all Chinese manufacturers. Their 3% market share from 3 years ago grew to 56% in 2003.

5. Bad reputation of Chinese brands

Obviously, rival companies did not want to fall behind and many companies centered around Huaqiangbei (华强北) started working on fake brands to keep up with Bodao. These low quality models caused a significant loss of faith in domestic brands.

In 2006, the Taiwan based MediaTek (聯發科技股份有限公司) manufacturing chips and individual building blocks of electronic boards came up with a new plan manufacture portable phone in a ready-to-order manner and as a result the manufacturing process became very rapid. They could produce cheap and convenient devices in China. Less developed areas in rural China also witnessed significant growth and low quality gadgets flooded the Chinese markets.

In response to this, large overseas corporations, such as Nokia and Motorola launched low end devices and they were working actively to regain their lost market proportion. Motorola released the famous MOTOC117 with a 500 CNY price label and Nokia started manufacturing the 3210, well-known to most of us who were born around 1990. Nokia sold more than 100 million of the 3210 and Chinese consumers tend to like overseas (more reliable?) brands more as opposed to domestic phones. Motorola and Nokia phones were extremely popular in China these days, because Chinese consumers could purchase them for the same price as the domestic phones. Local manufacturers witnessed significant losses of profit and this was caused by overseas companies.

Then Bodao released XiongMao (熊猫), Kejian and Soutec, but as they were pushed out of the market they had to withdraw their models. In 2006, Bodao acknowledged their defeat and they started developing cars. They even changed their name. So they started with beepers, then changed to mobile phones and finally they were manufacturing cars. No matter what, they seemed to be unable to find their way out of this oversaturated market.

When Bodao was looking for new possibilities and they were launching their new vehicle projects, Zhu Zhaojiang (竺兆江) who was responsible for the overseas markets decided to resign. He had visited over 90 countries when he was working as an overseas marketing manager and he gained insight into the overseas mobile phone manufacturing markets. He visited Hong Kong in 2006 and he established a company called Transsion (传音控股) to develop and popularize mobile phone related technologies.

Assembling mobile phones and developing these new technologies is as easy as rolling off a log. In the previously mentioned Huaqiangbei if you have a few hundred renminbi you can choose from a large variety of fake smartphones with many functionalities. These Chinese phones usually have good sound quality, strong signals and they are usually shockproof.

It is also true that competition on the fake phone market in China is very severe. You can create your own brand with essential no investment based on the very same technology that is being used by other brands.

Zhu Zhaojiang realizes that these phones should not be sold in China in large quantities, but rather in other countries.

6. The path of Chinese phones in Africa

Africa with its 1 billion residents will be a great choice for Zhu Zhaojiang. There are 3 worlds in Africa. South-Africa with European influence, the arab world above the Sahara and the undeveloped “dark” Africa below the Sahara.

Central Africa has many residents. There is Uganda and Nigeria with only 30% of mobile phone penetration rate. The situation is very similar to that of China in the 90s. The most popular phone manufacturer in Africa is Nokia and there is not a single brand that could hold a stable position behind Nokia. Local, Chinese and American companies continuously compete and non of them can create a monopoly in Africa.

At this point, the vast majority of fake-phone manufacturers in China decide to flood the African markets with their low quality gadgets, but none of them actually seemed to be interested in creating its own brand in these countries or to develop their own infrastructure on the continent.

Samsung and Nokia already prevail in the developed metropolitan areas of Africa and Transsion voiding these already saturated markets goes on a tough quest to uncover rural African segments.

In November, 2007 Transsion officially enters the African markets and they create a brand called Tecno. First they launched their dual-SIM phones that have already performed well in China.

7. Dual-SIM phones performing in Africa

There is a large number of providers in Africa and users struggle with getting stable signals. In some cases SIM cards from a certain provider don’t even work and fees can also differ based on the providers. Therefore many users use more than one SIM card. If they can’t get a stable signal, they use a different SIM card, but not many of these users have enough money to buy two phones, so this is a very inconvenient solution.

According to an official survey, there are over 500 million SIM cards in Africa and a single user has 2.39 SIM cards. So this will be a great market for dual-SIM phones.

And Transsion realizes this. They launch their dual-SIM models in Africa. This is the T201 model, but the problem was that they hadn’t produced enough and they run out of stocks in a month.

Zhu Zhaojiang, equipped with these experiences, launches the second brand called Itel in the next month. They strike the iron while it’s hot with the two brands and they release the 3-SIM phones as well. And then the 4-SIM phones. These multi-SIM phones spread in Africa very rapidly. This is basically the technology they developed in Huaqiangbei, but technology is not more than one factor in the whole success story.

8. Invasive marketing strategies in Africa

The initial success of Transsion is attributable to the ingenious marketing methods and brand formulation of Zhu Zhaojiang.

The African markets have their peculiarities. They are usually very scattered and you need good marketing strategies to tackle this issue.

9. Where? When? Up to what extent?

Transsion had to pay attention to these questions and Zhu Zhaojiang had already witnessed the growth of Bodao from essentially nothing and he has sophisticated marketing methods.

Zhu Zhaojiang invited a few marketing experts and they visited places in Africa that no one has ever dared to do so. No matter whether it was a dusty road or a deserted hut, they travelled there and they fortified their brand’s presence at these locations. It was not long before they had stores almost everywhere in Africa.

In addition to these stores, they worked a lot on creating their brand’s image and they put a lot of effort into marketing strategies as well. They appeared on almost every state TV in Africa and they covered an immense amount of windows, walls and billboards with their slogans and logos.

The blue billboards of Transsion were competing against the red billboards of Itel at the same locations. There were shacks in Africa where the Internet connection had been installed recently, the residents couldn’t even afford to buy cell phones, but the billboard advertising Transsion was hanging above their shacks.

They were actively promoting their brand inasmuch as they helped locals to buy tools from Taobao so that they could install their billboards in a more effective manner. They thought these fast techniques in person.

Citylights in Africa are uncommon. The company realized this and they installed these shiny billboards in African cities to promote Transsion. Two birds with one stone. You can immagine how grateful the africans were when they first saw these installments. They could hardly find their way to go home every night prior to the appearance of Transsion.

10. Advertising mobile phones with chickens Transsion has used the most valuable asset in the African villages to promote the brand. Household animals. For example if the locals had a holiday they launched a campaign with the following slogan: “Buy a phone and get a chicken!”. If you buy a smartphone you will get a rooster. The chickens were gathering around the phone shops. There were stores which had given away more than 20 chickens.

11. Swinging butts

The Chinese marketing experts realized that Africans love dancing and singing and they introduced the following game: Whoever shakes his/her butt the fastest gets a present. With this game locals could win Transsion products and the competitions have started. In addition to the chickens and the swinging-butts game Chinese representatives have given the locals resources that were very scarce in the area. They were occasionally given sheep and water.

Cooperating with the local resellers they have constructed their sales network in over 30 countries, but the problem was that these resellers had their own after sales service models. Transsion has unified these and they established a brand called Carlcare in 2008 to tackle this issue with several millions of dollars of investment.

The local workforce that was responsible for repairing the phones in Africa has been taken to the Chinese Huaqiangbei to learn more about how to repair phones. With this new knowledge they could repair the devices in a more effective manner and these Africans could also train the local workforce.

In 2018, they had 86 repair centers in Africa and they could repair phones at more than 1000 locations across the continent making them the largest customer support company in the region.

In addition to customer support and ingenious marketing strategies the Chinese sales experts started focusing on another very important issue. On one hand, the multi-SIM devices solved a crucial problem for the Africans, but there was another important task to solve. This was the battery of the phones.

The lack of electricity in Africa is a serious issue and locals cannot charge their phones as soon as they run low on battery. Transsion, targeting this issue, decreased the energy consumption of its models and they have also increased the capacity of the batteries. Well, standby time was the most important factor for Africans. The standby time of a fully charged Transsion device is almost half a month.

12. Targeting dance-loving Africans

Dance and singing is a very important element of many African cultures. Dance stages appear randomly and unexpectedly in an instant in Africa. Realizing this, Transsion has increased the size of the speakers in its devices and their sound quality is comparable to that of a portable speaker. These days, the most popular music-phone in Africa is a model from Transsion and they have released their Boom J8 as well.

They held a ceremony for the official release of Boom J8 and they invited the 18 most famous Nigerian celebrities. This event ranked as the most discussed topic on Twitter that day.

Transsion often provides presents to buyers. Among these are the headphones. Africans just love these items.

13. Chinese mobile phones in Ethiopia

The level of English in Ethiopia is not too high and most Ethiopians use a language called Amharic. Realizing this opportunity, Transsion, first in history started developing phones that natively support Amharic.

The freshly established Transsion tackled the problem of selfies in Africa too.

The phones developed by Apple and Samsung were not optimized for facial colour tones and when Africans were taking selfies with these devices at night nothing was visible, except for their teeth. Transsion, addressing this problem collected many pictures, processed these and they optimized the tones and lights. They spent an enormous 300 million CNY on this project, but the selfies that you can take with these devices are stunning!

The phones manufactured by other companies measured light based on the colour of the face, however the devices from Transsion measured position based on the eyes and the teeth and added brightness according to these parameters. Now Africans can shoot in chocolate or chestnut colours too.

So this is the short history of Transsion in Africa. They conquered the African markets and they now occupy a majestic position there. But how majestic is this position?

14. Transsion gaining authority in Africa

Based on a survey from 2016 it turned out that both Transsion and the other brands are now on the list of 100 most popular companies in Africa. Tecno is the 14th, ahead of Pepis and Microsoft. Itel is the 25th ahead of Hewlett-Packard and Google. Infinix has appeared on the list recently and occupies the 37th position.

Most importantly, the key to their success is in globalization. There is not a single Chinese character in their stores. There is no trace of China and they don’t advertise themselves as a Chinese company as other rivals would do.

Transsion appeared in Ethiopia in 2011 and they started assembling their phones in this year. They established their most important base in the world in Ethiopia and the workforce they employ is more than 90% Ethiopiean. This helps a lot to the local economy to develop and they mitigate unemployment related problems too. An Ethiopean representative said that Transsion is the first company that helped Ethiopia to profit from foreign money sources.

In November, 2016 Transsion signed an agreement with Yaya Touré from Manchester City and this made their brand even more popular.

Athletes promoting the brand, ingenious localization and employing local workforce make the Africans think that Transsion and its subsidiaries (Tecno, Itel, Infinix és a Spice) are actually African companies. Ugandans think that Transsion is Ugandan. Ethiopians think that it’s Ethiopian. Nigerians think that it’s Nigerian. So this means that Transsion not only sells phones in Africa, but they are already an integral part of their culture.

Nevertheless, Transsion can’t just sit back and relax.

The company acts according to the time-travel principle from Masayoshi Son. This tells us that innovative products first appear in the US and in a few years they make their way to Japan, China and then to other less developed countries.

Transsion, when compared with other rival companies from China does not develop new technologies and they can only rely on their intrusive marketing strategies and their low prices. Back in the days telecommunication in Africa was very undeveloped and 3G and 4G networks did not completely replace 2G networks. This meant that functional phones had their market value and smartphones coexisted with them.

The devices manufactured by Transsion are very cheap. When they entered the market, one Tecno phone was 15 USD and in 2018 a simple model is 10 USD. If you want to buy a Tecno smartphone you don’t have to spend more than 50-60 USD in Africa. These are much cheaper than any other brands.

Manufacturers on the mobile phone market consider two parameters: functionally phones for low price and smart phones with good technology.

These days, Africans would rather buy smartphones and they would be happy to stop using their old functional gadgets, however the largest proportion in the export volume of Transsion is from functional devices.

If we look at the data from 2018 we can see that Transsion had 70% of functional phones in their total sales volume and these phones have only accounted for 26.84% of their sales.

30% of their exports to Africa are from smartphones and this gives the 69.81% of their total sales. They had a 657 million CNY net revenue in this year and this means that they earn 5.3 CNY for each phone they sell. Their profit rate is not more than 3%. In this year they didn’t develop anything new besides the new selfie processing software.

Last year, having sensed the imminent danger they tried to get listed through a shell company, but they failed and they had no other option but to turn to the new Shanghai-based Sci-Tech innovation board (科创板).

According to the official documents submitted by Transsion before issuing their stocks research and development related expenditures between 2016 and 2018 was 385, 598 and 712 million CNY. Their sales volume in the same period was 11.7, 20 and 22.6 billion CNY. This means that research and development related expenditures accounted for less than 3% of their sales volume, mainly because they spent the rest of the money to build and develop factories. Among the companies looking to be listed on the Shanghai based exchange Transsion seem to be left behind. One of the requirements to be listed at this exchange is to spend more than 15% of the total sales volume on R&D expenses.

Speaking of patents, Transsion has a total of 630 patterns of which 97 are invention related patents, 385 are new application patents and 148 patents are design related ones. In the third quarter of 2019, Huawei had almost 80.000 patents among which 90% were inventions. In the first half of 2019, Oppo had 37.000 patents worldwide with 11.000 authorizations and 31.000 patent applications.

The difference is palpable, but oddly enough Transsion made its way up to the innovation board.

15. Severe competition on African markets

Transsion is not the only company on these African markets. There is an increasing number of Chinese companies looking to enter Africa with their products.

In 2014, the founder of Simi (思米), Zhou Yuqing (周裕庆) has also started investing into the development of mobile phones targeted at the African markets. In 2018 Simi became Ethiopia’s second largest phone developer company. Their export volume is comparable to that of Transsion and they pose a threat to their rivals originally soley operating in China.

Since last year, Xiaomi, Huawei, Oppo and Vivo, having experienced the saturation of the Chinese markets, have started focusing on Africa. Huawei has changed their original plans in this regard. They have not paid too much attention to entry level models, but they are trying to revitalize this sector as well.

Transsion followed a similar path, and without inventing too much they relied on ingenious marketing tactiques they had previously devised in China.

Zhu Zhaojiang admitted in an interview, that his luck will only last until 2022 and his company will inevitably lose its market shares.

But let’s just not be too negative about the future of Transsion. Although their recently developed application is not an innovative product it still succeeded in Africa. It is called Boomplay. Not many Chinese users are aware of this application developed by Tecno, but it is extremely popular in Africa. Every month it has almost 30 million users and it has 64 million users in total. Every month their user base grows with 2 million new users.

This application is also a tool for their marketing strategies to fully conquer Africa. They have already acquired several music databases to prevent new potential developers from entering this market. The application belongs to Transsnet established in 2017 with a joint investment by Transsion and NetEase to target African markets. Platforms to broadcast depressed users’ emotions are extremely popular in China. Transsnet is developing a similar one in Africa.

16. TikTok in Africa

Transsion and NetEase have released a local TikTok called Vskit, which has a huge user base today. The application called Palmchat is also their product.

Palmchat enables users to switch between functional phones and smartphones anytime. This is a huge advantage and there are more than 100 million users.

They are developing Xender to share files and Scooper is a news aggregator/distributor application.

Phoenix is a browser developed by the same Chinese team.

Transsion follows modern online trends in Africa and their competition has to work a lot if they want to compete with them.

In 1997 Huawei appeared in Africa and defeated Ericsson while helping locals to develop their telecommunication infrastructure.

In 2000 a Chinese businessman from Zhejiang loaded his bag with cell phone parts and knocked on Africa’s gate. He was the first colonizer from China.

In 2007 Transsion followed him and in not more than 10 years they changed from 2G directly into 4G and popularized the use of mobile phones in Africa.

So this is how it all happened with Transsion.

What do you think the future will bring to us?

In 2018, Chinese businessmen thought that the future of the Internet lies in South-East Asia.

In 2019, they thought India is the country upon which they don’t have full control.

Isn't Africa the country to which we should pay more attention to?

Mandarin Chinese-English translation by LB.

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