While many companies experienced significant drops in Q1, Transsion’s Tecno reported only a slight decrease in sales.
As expected, global smartphone sales plummeted in the first quarter of 2020. Research firms Canalys and Counterpoint Research reported that global shipments fell by 13% compared to the same period in 2019. The decline is unsurprising as the COVID-19 pandemic has disrupted global supply chains for a wide range of products, from cheese to chipsets. The most significant drop occurred in China, where smartphone shipments decreased by 27% compared to the previous year, according to Counterpoint.
China plays a crucial role in the global smartphone supply chain, so the pandemic’s outbreak in December was expected to impact the entire industry. Even companies like Samsung, which have manufacturing bases in Vietnam and South Korea, were affected due to their reliance on Chinese suppliers. The Korean company experienced a 17% decline in smartphone sales.
However, while other brands faced major declines, some up to 40%, Transsion’s Tecno remained relatively unaffected.
Tecno’s Q1 Smartphone Sales
Tecno sold 4.6 million smartphones in Q1 2020, according to Counterpoint data. This represents a 2.13% decrease compared to Q1 2019 when it sold 4.7 million devices; a relatively decent performance. One reason for this resilience is Transsion’s primary market: Africa.
In the fourth quarter of 2019, Tecno smartphones accounted for 20% of all sales in Africa. Along with other Transsion brands (Infinix and Itel), Tecno controls 52.5% of the continent’s phone market.
Unlike other regions, Africa recorded its first COVID-19 case late in Q1. Due to slow testing, reported cases did not surge immediately. African governments did not fully implement lockdown measures until late March and April.
As a result, Transsion continued to retail its devices normally, with supplies from its factories in Pakistan, India, Bangladesh, and Ethiopia remaining steady until the end of the quarter.
Q2 Outlook for Smartphone Companies
Analysts predict that Q2 will witness the peak impact of the pandemic, leading to a significant drop in sales for most companies.
“Most smartphone companies expect Q2 to represent the peak of the coronavirus’ impact,” says Ben Stanton, Senior Analyst at Canalys. “It will test the resilience of the industry, and some companies, especially offline retailers, will fail without government support.”
The Q2 decline is anticipated as many countries implemented lockdowns in April, further disrupting global supply chains.
Transsion operates factories in five countries: China, India, Bangladesh, Pakistan, and Ethiopia. However, three of these countries enforced lockdowns between March and April.
Its Indian factory was shut down for 40 days. Reports suggest the country’s smartphone industry recorded zero sales in April, as government restrictions allowed eCommerce companies to deliver only essential products. Smartphones and electronics were considered non-essential.
In Bangladesh, where Transsion is the fifth-largest phone company, lockdown lasted three weeks. The company produces 450,000 devices in Bangladesh, 90,000 of which are smartphones. Ahead of the lockdown, production was expected to drop by 40%, according to Rezwanul Haque, CEO of Transsion Bangladesh.
“We’re unable to launch new products due to a shortage of raw materials. The situation will worsen if the crisis persists,” Haque said in March.
Meanwhile, Pakistan began its lockdown on March 23, which will be eased by May 9. This has slowed activities at Transsion’s Karachi plant, which has the capacity to produce three million smartphones annually. Transsion hinted at a possible decline in sales in its full 2019 financial report released in April, stating that the pandemic “has adversely affected the economic operations of many countries and regions worldwide.”
“If the epidemic is not effectively contained and spreads further, the company’s overseas operations will be impacted to some extent, potentially affecting annual results.”
Transsion’s Strategy for Q2
Transsion faces a two-fold challenge: reactivating factories quickly and addressing falling demand in key African markets like Nigeria.
Its factories in India, Pakistan, and Bangladesh may reopen in May as governments ease lockdown restrictions. Bangladesh’s critical garment factories reopened last week.
Operations in Transsion’s Ethiopian factory may continue as the country never went into lockdown. Meanwhile, factories in China have gradually reopened since late March.
In its latest financial report, Transsion stated it has built a robust logistics network with warehouses in Ethiopia and Dubai. The company told investors it is utilizing “air, sea, and other transportation methods to achieve rapid delivery of products and raw materials in Africa, Southeast Asia, South Asia, and other regions.” However, we are already midway through the second quarter, and April was disrupted by lockdowns. Companies like Foxconn and Xiaomi are also racing to restart factories in places like India.
Manufacturing industry stakeholders estimate it will take two to four weeks for factory units to return to pre-lockdown levels.
“This quarter would be a write-off for the entire India,” MS Unnikrishnan, an Indian industrialist, told Bloomberg. “By the second quarter, we will learn to live with the disease.”
Beyond factory operations, Transsion may need to address falling demand in key African markets like Nigeria. The country is facing the dual impact of the pandemic and a decline in oil prices, affecting income levels and purchasing power for millions.
IDC forecasts a 3.9% decline in Nigeria’s smartphone market in the second quarter. However, this prediction was made in March and may not have accounted for the April lockdown.
Analysts believe low-end devices will experience the most significant decline, while mid-range and high-end devices will see smaller drops.
Transsion must consider these factors as it aims to rebound from the minor decline in the first quarter.
