Transsion's half-year profits surge 32% despite COVID-19 pandemic

Image source: Wall Street Journal

Chinese phone manufacturer, Transsion Holdings is recording an impressive 2020 despite all the realities from COVID-19. In its recently released earnings report, the company raked in revenue of 13.9 billion yuan ($2.02 billion) for the first six months of the year. This represents a 31.81% growth over the same period in 2019.

Interestingly, Transsion’s profits surged in H1 2020, beating expectations shaped by COVID-19 realities. Between January and June, the company posted a profit of $1.09 billion yuan, a 33.4% growth from 2019.

This growth is unprecedented and somewhat surprising, considering that the pandemic adversely affected its supply chain and production activities in key countries including India, Bangladesh and Pakistan.

The Chinese company withered the impact of Covid-19 by ramping up sales and marketing efforts. While it is recently growing its services revenue, the mobile business accounts for 92% of Transsion’s total revenue. Mobile revenue jumped to 12.8 billion yuan in the first half of 2020, a 31.6% growth over the same period in 2019.

The pandemic put the pressure on the company’s mobile business as global supply chains suffered. The outbreak which started in China caused governments globally to lockdown their economies for weeks, adversely affecting factory production.

Transsion was forced into an uncertain position. It operates factories in five countries: China, India, Bangladesh, Pakistan and Ethiopia. But between March and April, three of these countries went under lockdown. China was under lockdown until March when factory production slowly restarted.

Transsion’s Indian factory was grounded for 40 days with reports suggesting the country’s smartphone industry recorded zero sales in April because the government restricted eCommerce to only essential products. Smartphones and electronics were deemed non-essentials.

Bangladesh, where Transsion is the fifth biggest phone company, was on lockdown for three weeks. The company produces 450,000 devices in Bangladesh, and 90,000 of them are smartphones. But in late March, ahead of the lockdown production levels was expected to drop by 40%, said Rezwanul Haque, CEO of Transsion Bangladesh.

But Transsion navigated these hurdles by making advance payments to suppliers for key components. The company said it also stocked up on product inventory to meet sales growth in overseas markets. It told shareholders its devices are now sold in 70 markets globally.

But recently, Transsion has attracted negative press following a report by Buzzfeed News that its devices are infected with malware that steals user’s data and money. The report focused on Transsion’s Tecno W2 smartphone, discovering suspicious activity on over 200,000 devices in 19 countries.

“[The malware] is often used to deliver invasive ads that send money back to whoever controls the malware,” Buzzfeed News’ Craig Silverman wrote. “But it can also be used to install apps that subscribe the victim to paid services via monthly billing or prepaid data — siphoning cash directly from the phone’s owner.”

Transsion denies the allegation, claiming the malware is a previously known vulnerability that only affected one Tecno phone and has since been fixed. It said users can download the patch to fix the vulnerability.

Meanwhile, the report comes at a time when global suspicion against Chinese tech companies is high. Most obvious is the US-China dispute that has penalised Chinese companies including Tencent’s WeChat, ByteDance, Beijing Kunlun and Huawei. Zoom has also come under pressure from the US government, while US national security concerns blocked Alipay’s attempt to acquire MoneyGram. In India, the government has banned dozens of apps made by Chinese companies including TikTok.

Chinese suspicion is also becoming a domestic concern for Africa. Last year, reports claimed Huawei had built surveillance systems for some African governments. And in Nigeria, lawmakers are investigating if the country has exposure to Chinese loan terms that could affect its national assets and sovereignty.

Transsion’s focus on Africa and the manufacturing jobs it has created in India could help it steer away from these issues. However, as the company looks to step up AI development and services revenue including advertising, fintech and entertainment services, it may have to grapple with concerns about data privacy and its ties to China.

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