China’s Smartphone Dominance in Africa Is No Accident
Capitalizing on Chinese infrastructure development and building for the customer first, manufacturers have cornered the market.
You’ve likely never heard of Transsion, but the little-known Chinese smartphone manufacturer is quietly taking over Africa’s mobile market. The company doesn’t sell devices in the United States or Europe. It’s not even a top 10 brand in China. It does, however, command 30% of Africa’s smartphone market, with close to a 100m phones sold there in 2017 alone.
Transsion’s rise to prominence, the subject of a recent profile in Bloomberg Businessweek, is not all that unusual for Chinese companies on the continent. Starting in 2006, Transsion began building cheap smartphones designed specifically for the African customer passed over by Western manufacturers. They began with phones that were 20% cheaper than market leaders, and then added features African customers wanted such as large batteries to make up for spotty power grids and multiple SIM card options.
Rapid urbanization, the growth of the middle class, and unprecedented connectivity over the last decade have created a new class of customers in Africa. Transsion recognized the opportunity others had passed up and jumped head-first into the market.
Is Transsion’s rise good for African development? Access to cheap smartphones has dramatically changed the financial prospects for millions of people. Financial tools now exist for those at the bottom of the pyramid to save and share money in a secure, efficient, and affordable manner through applications on their phones. Entrepreneurs with invaluable local knowledge are creating more digital applications perfectly suited to the needs of their target markets. Transsion made much of this critical development possible but given its connections to the Chinese government in the form of undisclosed government-backed investment, it’s subject to several forces beyond its control.
Infrastructure as an entry point
From roads to fibre-optic cables, the infrastructure that China has built in various African countries has accelerated growth there. China’s private sector, in the form of companies like Transsion, have come in behind the government with products and services that government-funded infrastructure makes possible. The result has empowered an entirely new class of African customers from the middle class to the bottom of the pyramid.
Many of China’s infrastructure projects are tied to agreements with ruling parties in countries from Angola to Ethiopia. Recent political developments including instability in Ethiopia and Zimbabwe highlight the inherent uncertainty of some Chinese positions. This instability also has an adverse effect on Transsion’s ability to do business and manufacture smartphones in Africa. From the consumer perspective, however, there are other factors at play.
As China rolls out its Belt and Road Initiative, critics weary of Beijing’s intentions see the project as a way of extending soft power through the confluence of infrastructure projects, smartphones, and mobile applications. The Chinese government lays the foundation with infrastructure projects around the continent. Chinese smartphone manufacturers make business bets that the new infrastructure will create new customer bases. Finally, Chinese apps jump into these newly unlocked markets in the never-ending quest for user growth. Chinese apps such as WeChat and AliPay have already established a footprint in African markets.
The next opportunity is applications that harness the power of this new customer base, especially economic migrants and those on the bottom of the pyramid that previously had little access to the marketplace.
So, is there opportunity for other entrants? As the Facebook saga unfolding in the West demonstrates, data privacy is paramount for governments, users, and the private sector. Applications enabling African users to monetise their identity and not simply give it away on the backs of accessible infrastructure could be the next breakthrough business opportunity. Add to that concerns about China’s view on surveillance and data privacy. Beijing has one of the most sophisticated surveillance sectors in the world. If customers start to worry that Chinese brands are using their data in ways that could be compromised, they will start to see value in alternative providers, especially those that create solutions around identity and data security.
Local entrepreneurs might have the edge in this space. To make alternative solutions truly viable, it will take more than dynamic private sector companies with innovative products. Local governments will need to adopt data standards and enact the right type of regulation around privacy. Civil society will also need to better communicate the importance of consumer identity and help citizens understand the power of their data.