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SHANZHAI

China is making more of Africa’s phones than you think

REUTERS/Baz Ratner
Nairobi’s central business district (CBD)
Nairobi

When Transsion went public on Shanghai’s NASDAQ-style stock exchange Sept. 30 topping a $6.5 billion market cap, the industry was a-buzz around the little-known manufacturer from Shenzhen, China whose brands, Tecno and Infinix have grown rapidly to make it Africa’s No.1 maker of cellphones in just a few short years.

But what has received much less notice is the host of other Chinese-owned cell phone makers gaining traction in the African mobile phone market.

In coming years, we can expect to see more of these firms make major moves in the African mobile phone market. Transsion’s listing prospectus listed nine other phone brands gaining traction in the African mobile phone market, five of those, with a combined 18.7% market share, also had Chinese roots and were not just OEM partners but brand owners and licensees.

Chinese companies dominate Africa’s phone market 

201820172016
Transsion (China) “Tecno” et al49%45.12%33.73%
Samsung (South Korea)10.27%12.85%16.29%
HMD (Finland) “Nokia”6.78%3.96%0.00%
Huawei (China)4.05%2.69%4.02%
TCL(China)3.75%4.22%4.24%
Condor (Algeria)2.42%2.61%2.11%
Mobicel (South Africa)2.25%1.70%1.73%
X-Tigi (China)1.65%1.23%2.00%
Starlight (Algeria/China)0.93%0.00%0.00%
Stylo (South Korea)0.89%0.46%0.02%

Source: IDC 

Brand awareness

Over the past year, Oppo and Vivo phones have made aggressive inroads into the African market. Walk through Nairobi’s central business district on any given day and both companies’ green and blue signs can be seen from down the block, balloon towers raised and music blasting from each stand. Oppo gadgets are marketed heavily with one vendor claiming, “Oppo is currently selling better than any other brands”.

If a customer isn’t keen on Oppo, they are quickly directed to the new Vivo 17. But, when asked for the distinguishing features between the two brands there was little to be said.

The phones tote different names, but they essentially come from the same place and DNA. Vivo and Oppo are sub-brands of BKK Electronics Company, a private, multinational tech hardware company based in Shenzhen, China.

Alexandria Williams
Downtown Nairobi: Chinese-made phones everywhere

Nokia, which was one of the early dominant leaders in Africa with its simple feature phones has lost ground here as it has elsewhere  over the years. Today the brand has  2.26% market share in Africa and is licensed to Finnish company HMD Global. A major portion of the company’s research and development arm has moved to China.

Then there’s “Alcatel-Lucent”, a Nokia spinoff whose phones are often re-branded and used by other cellphone makers like Safaricom’s Neon. These phones are, in fact, manufactured in China through a joint venture with Chinese home appliance maker, TCL.

While the TCL-Alcatel joint venture only takes a 1% share of the mobile phone market in the Middle East and Africa, the company’s TCL brand phones maintained a 3.75% market share, right after the increasingly popular Chinese telecoms giants Huawei.

It’s no coincidence that a growing number of Africa’s most popular phones are manufactured in China. For years, Chinese mobile manufacturers have had practice in developing affordable smartphones for a growing market.

“Shanzhai”

In China, many of the mobile phone makers started out as “shanzhai” manufacturers,  a Chinese term used to indicate products that are made as cheap imitations of another.

Back in 2011, when cellphones were increasingly popular in China, but out of reach for those outside of China’s metropolises like Beijing and Shanghai, these “shanzhai” mobile phone makers filled a void where popular phones could not. What they developed were simple and affordable imitations of the hottest products on the market. As they gained loyal customers in less traditional markets, they began to branch out and create products with distinct features that rivaled the very best.

But, as more “shanzhai” mobile phone makers grew in business, they hit walls at home. The market was saturated, incomes were rising, and consumer tastes began to shift toward phones with better brand recognition. Realizing decreasing profits at home, these firms saw new promise in the African mobile phone market.

It was through massive rebranding and sub-branding campaigns that the “shanzhai” mobile phones became the standard for the African mobile phone market.

Oppo is a strong example of this phenomenon. At home, Oppo has traditionally been branded as an affordable phone for the working class. In Kenya, Oppo has hinged itself on its brand new Reno 2 that retails at 47, 000 Kenyan shillings (~$470) which targets the middle class. That said, the key strength the various Chinese makers bring to African markets is affordability.

Some of the Chinese brand smartphones are priced from as low as the equivalent of $50, this is why more expensive global leaders like Apple’s iPhone and upmarket Samsung models do no feature strongly in most African markets. This price sensitivity is especially relevant as more people upgrade from feature phones to smartphones to use popular services like WhatsApp and Instagram.

Samsung, which has had a strong presence in most African markets with its feature phones, has lost market share overall rather than gain as more users upgrade to Chinese-made smartphones. But as IDC data also showed this week Samsung might be losing market share but it recorded a 61.4% growth year-on-year with phones priced between $100 and $200 in the third quarter of the year.

In China, after smartphone sales dropped 14% in 2018. The two makers that saw significant growth despite the slump, Huawei and Vivo, had already begun making inroads in Africa. A clear signal for others to follow suit.

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