By ZHANG Yi

Transsion, the Chinese telecom company that sells 40 percent of the phones in Africa, reports strong growth for Q2 after five quarters of decline. The Shenzhen-based company says in its preannouncement on Wednesday that Q2 revenue increased by 30.7 percent year over year to 15.8 billion yuan (US$2.2 billion). Profits doubled from the previous quarter to 1.6 billion yuan, 83 percent higher than a year ago.

Total H1 revenue and profits increased by 8 percent and 27 percent, to 25 billion yuan and 2.1 billion yuan.

The company attributes the revenue growth to market expansion and product upgrades. Gross margin improved due to lower costs, and because more people in Africa are switching to smartphones.

Global smartphone sales fell for the eighth quarter straight by 8 percent in Q2, according to market research firm Counterpoint. The market in Africa declined by less.

Most people out of Africa may have never heard of Transsion and its three brands (TECNO, itel and Infinix), or don’t even realize that flip phones are still used in large swaths of the world. Transsion sells 11 percent of all phones sold in the world, but the share is only 6 percent if counting smartphones alone.

Transsion’s market share in Africa has fallen from the 57 percent peak but maintains a substantial 40 percent. The company has been expanding in South and Southeast Asia to make up for it.

Africa, however, will remain its most important market. The population is young and becoming more urbanized. They are switching to smartphones in large numbers and embracing mobile internet without going through a personal computer stage, which creates opportunities for companies that are not Western behemoths.

Since 2019, Transsion has been making non-phone products, including electronic gadgets and home appliances. It also owns a repair business called Carlcare and some operating systems. Phones still generate 90 percent of its revenue.

Africa’s ongoing mass adoption of smartphones will keep profits growing for some time. The gross margin in Africa was 27.6 percent last year, 11 percentage points higher than in the rest of the world. And this year’s profit increase is also primarily driven by Africa. But the management warned that expanding in places where smartphones are already ubiquitous will dilute the overall margin.

More than 80 percent of Transsion’s phones are already smartphones, up from 58 percent in 2016. This means the company will need to find new ways to maintain its profitability. It has been trying to make midrange and high-end products, including phones and IoT home gadgets.

Chips became cheaper this year, which lowered costs. Inventory has fallen back from last year’s high level. Its stock price has doubled since the lows last year. It closed at 125.7 yuan on July 27.