| Living through COVID-19 in an African country has felt like a lot of waiting around. For what? I’m not sure. While the internet says we are in an apocalypse, daily life has pretty much stayed the same. But that’s about to change: governments across the continent are shutting their borders and restricting movement in a bid to slow the spread of the virus. Beyond its symptoms, though, COVID is grinding the global economy to a halt. One wonders what that means for Africa’s smartphone market, and for the industry at large (ground zero, Wuhan is the world’s largest producer of optical fibre).
Transsion, the continent’s largest phone manufacturer, has not published guidance about the effects of the outbreak on its business, but we can make an educated guess. While Nigeria’s smartphone market grew 5.3% quarter on quarter (QoQ) in Q4 2019, the IDC expects a 15.4% decline in Q1 2020, and another 3.9% in Q2. Since most phones, Transsion’s included, are produced in China, the supply chain disruptions will likely mean limited supply on the continent.
Even though Transsion operates factories in India, Bangladesh, Pakistan, and Ethiopia, they all rely on critical components from Shenzhen. And even during a recovery, component suppliers will likely prioritize large companies like Apple over everyone else. In Bangladesh, the company’s production rate could drop by up to 40% if the supply crunch continues. “We’re failing to launch new products due to the shortage of raw materials… This situation will worsen if the crisis prolongs,” said Rezwanul Haque, CEO of Transsion Bangladesh.
For Transsion’s Nigeria business, the damage is two-fold, as the drop in oil revenue from its biggest customer (China) will mean less purchasing power for consumers in the short to medium term. The company reported $3.6b in revenue last year, up from $3.2b in 2018. It may have to double down on its digital services to make up the lost revenue.
We don’t yet know the extent of the damage, but we should expect it to be wide ranging. Africa could run out of smartphones this year; the inevitable march of adoption could get stopped in its tracks. What would that mean for the tech industry’s growth story?
On a more optimistic note… |
