Transsion rebounds, as its ‘Out of Africa’ story stumbles

The budget smartphone maker has renewed its application for a Hong Kong IPO, reporting revenue for its core Africa market rose last year, as all of its other markets fell

Key Takeaways:

• Transsion has filed for a Hong Kong IPO, reporting its revenue rose 25% in the first quarter of 2026 after returning to growth in the second half of last year
• The budget smartphone maker controlled a massive 61.5% of Africa’s smartphone market by unit shipments in 2024, but just 22.5% of the market by revenue

By Doug Young

Investors may be flocking to AI and chip stocks these days, but that high-tech preference isn’t finding its way to the older and more mature smartphone sector. That could bode poorly for budget smartphone maker Shenzhen Transsion Holdings Co. Ltd. (688036.SH), as it renews its bid to list in Hong Kong, which would complement its existing listing in Shanghai.

Truth be told, the company’s most recent financials, contained in an updated Hong Kong IPO preliminary prospectus filed last week, don’t look too bad. Its revenue began to rebound in the second half of last year and continued to rise by a strong 25% in the first quarter of 2026, reversing a year of declines. That looks quite strong when you consider that revenue for Xiaomi (1810.HK), the company’s closest publicly traded rival, reported that revenue for its core smartphone business fell 12.5% in the first quarter.

Perhaps in recognition of its relatively strong recent performance, Transsion’s Shanghai-listed stock is “only” down 34% over the last 52 weeks, compared with Xiaomi’s larger 54% decline. But both of those large declines show that lower-end smartphone makers have fallen out of favor with investors.

On the whole, smartphones are increasingly seen as a rapidly maturing product category, without much room for major innovation. As the industry increasingly matures, we’re almost certain to see a new generation of manufacturers from lower-cost markets like India rise to challenge the Chinese brands that now dominate the lower end of the spectrum, including not only Transsion and Xiaomi, but also others like Vivo and Oppo.

On top of that broader macroeconomic factor, the entire industry is also being challenged these days by soaring memory prices, which are the single largest cost for most manufacturers. Transsion’s latest listing document shows that its costs for memory chips rose about 10% last year, following an even larger rise in 2024. In that process, memory rose to account for 28% of its raw material costs last year from 21% in 2023.

Higher-end smartphone makers like Apple (APPL.US) and Samsung (005930.KS) have been able to absorb those higher memory costs without raising their prices by sacrificing some of their margins, which are already quite high. But budget players like Transsion have much lower margins, and thus are having to raise their prices to avoid falling into the red, which is weighing on their sales.

Transsion is the brainchild of founder Zhu Zhaojiang, whose history in China’s mobile communications sector dates back to his work at Ningbo Bird, one of the country’s early leaders in cellphone space. Simpler feature phones, which are the precursor to today’s smartphones, still dominated the market back then, and Zhu used his experience to create products targeting the African market that was neglected by most major cellphone makers at the time.

The company quietly rose to dominate the lower end of Africa’s smartphone market with its Tecno, Infinix and Itel brands, and was the top seller on the continent in terms of unit sales in 2024 with a massive 61.5% of the market, according to its listing document. But reflecting its status as a budget brand, it only controlled 22.5% of the market in terms of revenue, making it the second-largest player that year.

Smartphone transition

To broaden its base, boost its margins and appeal to increasingly affluent consumers, Transsion has been slowly phasing out its feature phone business to focus on smartphones. It has also been trying to diversify geographically beyond Africa, though that campaign has been running into headwinds lately as it faces greater competition in those markets.

Smartphones accounted for about 84% of the company’s revenue in 2025, while feature phones made up just 5.5%. As it has moved up the value chain, and has also been forced to raise prices in response to rising memory costs, the average selling price (ASP) for its smartphones rose to 566 yuan ($83.62) last year from 544 yuan in 2024. But that latest price is still less than half the ASP of 1,310 yuan for Xiaomi’s smartphones in the first quarter of this year, showing that Transsion remains stuck in the smartphone cellar.

At the broadest level, Transsion’s overall revenue returned to growth in the second half of last year, after declining in the second half of 2024 and first half of 2025, based on calculations using its previously published data. Its revenue grew 7% in the second half of last year to 36.5 billion yuan from 34.1 billion yuan a year earlier. The growth rate then accelerated to 25% in the first quarter of this year, as the figure rose to 16.2 billion yuan during that period from 13 billion yuan a year earlier, according to its latest quarter results posted to the Shanghai Stock Exchange.

After declining steadily between 2023 and 2025, the company’s gross margin also rebounded to 22.0% in the first quarter from 19.3% a year earlier, showing its ship was steadying.

Geographically, however, Transsion’s “Out of Africa” story is rapidly running out of steam. Africa was the company’s only major market where revenue rose last year, climbing nearly 10% to make up about 38% of its sales. By comparison, revenue from Emerging Asia Pacific markets, its second largest region, fell 3.6% to make up 36% of sales, while the Middle East and Latin America fell 7.1% and 24%, respectively.

In addition to the challenges from competitors, Transsion also faces a series of patent infringement lawsuits in Europe and Southeast Asia filed by telecoms giant Ericsson and InterDigital in 2025 and 2026. China’s securities regulator reportedly requested additional information about that litigation in April, potentially creating another hurdle to getting the necessary approval from the China Securities Regulatory Commission for the Hong Kong IPO.

On the bottom line, Transsion is still profitable, though that metric has been a bit erratic over the last year. Its profit fell 53% to 2.61 billion yuan last year from 5.6 billion yuan in 2024, though that appears mostly related to big drops in “other income” and “other gains” unrelated to its smartphone business. Its profit rose 43% in the first quarter of this year to 700 million yuan from 490 million yuan a year earlier.

If the company succeeds with its latest Hong Kong IPO attempt, appetite for the stock could be weak due to competition from other emerging technology companies. That said, its recent rebound could attract some investor attention, and it could also draw some bargain hunters if it prices the stock significantly below its Shanghai shares, which currently trade at a price-to-earnings (P/E) ratio of 22 and price-to-sales (P/S) ratio of 0.9.

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