September 4, 2023

Transsion Holdings reported revenues of RMB 25.03 billion for the first half of 2023, registering a growth of 8.3% YoY. Net profit grew 27.2% YoY primarily due to better product mix (higher proportion of smartphones as compared to feature phones, with the former accounting for 92% of group revenues) and geographical expansion into higher-value markets.

Q2 2023 was the bright spot as revenues were up 30.7% while net profit grew 83.9%. It was the best quarter in Transsion’s history in both revenue and net profit terms. Gross margins also improved to 24.5%, up 2.4% from a year ago.

Much of Transsion’s turnaround in the key financial metrics above can be attributed to a rebound in macroeconomic fundamentals in the African home market and beyond. Most importantly, inflation rates have come down while food prices have stabilized. Local currencies have also found a stronger footing while several indebted countries across the emerging markets have managed to secure restructuring packages with lenders. As Africa’s most entrenched handset company, thanks to its deep channel penetration and marketing heft, Transsion once again benefitted the most from the upturn.

Transsion’s operating cost in H1 2023 increased 5% YoY as the company is ramping up its operations, particularly in newer markets. It has been aggressive with sales and marketing despite the cyclical downturn, with the spending on these activities increasing 23.6% YoY in H1 2023. R&D spending was also up 20.6% YoY to drive premiumization efforts and develop higher-value products to target the new markets. Costs attributed to management grew 6% YoY, whereas cash flow from operating activities turned positive, primarily due to the reduction in the cost of components and materials, as the company is reducing its inventory and moving towards a leaner operating model.According to Counterpoint Research, Transsion’s smartphone sales volume grew 3% YoY in the first half of 2023 and 17% YoY in Q2 2023 as demand for TECNO smartphones increased globally, especially in the company’s newer markets. This helped Transsion’s cash flow, as cash on hand increased 61% YoY to reach an all-time high of RMB 12.79 billion. The number of inventory days dropped further to 61, from 86 a year ago. Therefore, the inventory problem that has been troubling the company for the past year has successfully been managed.Much of Transsion’s financial successes can be attributed to its continued commitment to entering new markets. In Q2 2023, Africa accounted for 57% of Transsion’s smartphone sales volume, a net drop of 8% from a year ago. Outside Africa, Transsion smartphone sales grew 35% in Q2 2023, most notably in Latin America, Eastern Europe, India and Southeast Asia.

The reason for Transsion’s big increase in profitability is found in its ability to upsell to customers. Average selling prices (ASP) for Transsion smartphones rose by 14% YoY for two years in a row. The MEA region anchored the increase as a big expansion into the Middle East was the main factor. In a bid to replicate its success in Africa, Transsion has targeted the low end when entering new markets, but there is potential for the company to grow beyond the current level.

While Transsion continues to enjoy stable gross margins of around 30% in Africa, the company does face a more competitive landscape in the rest of the world, with gross margins of 15%-20%. However, there is room for improvement as the company continues with its premiumization strategy. In a recent interview, Transsion VP Qi Zhang said the company would be launching a flip foldable in September in another attempt to showcase its technical prowess in the premium segment.

Improved Inventory Outlook Paves Way for Revenue Growth in 2023

May 16, 2023

Transsion Holdings reported revenues of RMB 46.6 billion for 2022, down 5.7% YoY. Net profit, however, retreated 36.5% YoY due to macro headwinds like inflation, higher interest rates and a drop in consumer sentiment negatively affecting handset shipments.

Lower profits were also attributed to an increase in marketing and brand spending (+11.6% YoY) and continued ramp-up in R&D efforts (+37.5% YoY). Costs attributed to management fell 2% YoY but were less than the extent of the revenue drop. Cash flow from normal operations dropped 51%, reflecting the rise in costs as well as the inventory situation.

According to Counterpoint Research, Transsion’s 2022 smartphone sales volume fell 14% YoY, as demand for smartphones retreated globally, especially for price-conscious consumers in emerging markets. The company’s handset production volume fell even more during the year, at 20.9% YoY, suggesting the inventory issues took a toll on the company’s normal device launches and production plans for the second half of 2022. Inventory days stood at 67 by the end of 2022, an increase from 61 by the end of 2021. However, the situation was better than in H1 2022, when inventory days stood at an alarming level, in the 80s. With aggressive destocking efforts, the company has reduced its inventory level to the lowest since the end of 2020, an impressive feat as profit margins were well-maintained.

In terms of geographical distribution, Transsion made meaningful progress in tapping into higher-value markets out of its Africa base. Smartphone sales dropped by 18% in Africa during 2022. The consumers here are far more price-conscious than in other regions. On the other hand, outside Africa, smartphone sales dropped by a modest 8.4%. Transsion’s revenues from Africa dropped 14.9% during the year, while revenues increased 4.1% in other regions. Gross margins were also a bright spot for other regions, advancing 1.23% as compared to a drop of 0.18% in Africa. Transsion’s diversification efforts seem to be bearing fruit as the share of Africa revenues in the group’s total revenues accounted for only 45%. The number was roughly 50% in the previous year.

We noted in our post on Transsion’s Q3 2022 performance that sales and R&D costs are two significant expense areas that impact the company’s profitability. Marketing and brand spending increased mainly due to the channel investments needed to open up markets in areas like the Middle East, Southeast Asia and Latin America. Eventually, this will start to bear fruit, but it is one area that the company will need to look at closely as the global smartphone market and the economy in general continue to be stuck on low gear. We have seen high-profile market entry flops from other Chinese brands like OPPO and vivo, so it will be important for Transsion to keep cost discipline intact.

On the other hand, an increase of 37.5% in R&D costs shows the company’s commitment to broadening its product range, as well as aspirations to move into higher-value smartphone categories. This trend should continue as consumers will start to see 5G capabilities as the baseline case for smartphones, even in lower-value markets like Africa. Despite this, the R&D cost will continue to stay at around 3.1% of the company’s revenues. From a market perspective, Transsion is not expected to move drastically into other product ranges; rather, product improvement will mainly serve the company’s core customer base’s technological demands.

Q3 Revenue Stays Resilient, But Profit Declines Sharply as Costs Balloon

December 13, 2022

Transsion Holdings has reported flat revenue growth for Q3 2022 at 12.9 billion RMB. However, net profit slumped 47.4% YoY due to macroeconomic headwinds, inventory destocking initiatives, competitive pressures, and higher R&D and market expenditure.

Transsion Group Quarterly Revenue and Net Profit Margin

Transsion’s Q3 smartphone shipments fell 18% YoY, as emerging market demand was hammered by macroeconomic concerns. Inflation rates ticked higher, continuing the pressure on lower-income consumers with high food and energy prices. Local currencies too continued to depreciate against the US dollar.

Despite the big drop in shipment numbers, Transsion’s revenues still achieved positive growth. This was due to a big increase in smartphone selling prices. TECNO and Infinix’s average selling prices (ASPs) rose 26% and 28% YoY respectively. Transsion was able to achieve this due to successful iterations of mainstream devices across TECNO and Infinix, while launching more sophisticated devices that have gathered popularity among aspiring switchers. On the other hand, bringing higher-value products to more mature markets in India and Southeast Asia meant higher contribution from higher-end products to the company’s revenue mix.

 Transsion Group Financials Deep Dive – Sales, R&D and Inventory

Three items, in particular, caught our attention in Transsion’s Q3 report:

• Inventory: Since the COVID-19 lockdowns, Transsion has moved decidedly away from the feature phone business and into the smartphone business. In parallel, inventory levels have also crept up, reaching an all-time high of 80% of quarterly revenues in Q2 2022, which caused discomfort for the management. In Q3, this level was brought down to a more manageable 57%, which put pressure on margins in the quarter but removed a significant uncertainty for future quarters, as the smartphone market is not expected to rebound until well into 2023.
• Sales cost: Other than the cost of goods sold, sales costs represent the biggest cost item in Transsion’s income statement. In a year when Transsion has reported slowing revenue growth, its sales costs have increased significantly as the company paves the way for an aggressive expansion into other regions. Transsion will be hoping the global smartphone market recovers quickly in 2023, but its investment case could come into doubt if smartphone shipments and market share do not pick up meaningfully in its key markets in the next few quarters.
• R&D: Transsion is spending heavily on R&D, which is an encouraging sign as the company aspires to move into higher-value smartphone segments and other smart device categories. We expect this trend to continue as the window of opportunity for entry-level devices narrows, considering device costs are expected to creep up, in line with the inflation rate.

Last quarter, we discussed Transsion’s stock options plan for 2022, which is linked to 2024 financial metrics. We expect the company to target 20-25% annual revenue growth rates for both 2023 and 2024. Much of this will depend on the company continuing to move up the smartphone value chain with 5G-capable devices, entry into IoT segments and monetization initiatives for its wide user base. Above all, the recovery of the global economy and smartphone market will be pivotal for Transsion as it gradually becomes more exposed to a wide range of different geographical locations.

Resilient Q2 Performance Driven by Pivot to Value, But Macroeconomic Challenges Remain

August 29, 2022

Transsion Holdings reported a 3.7% YoY increase in its Q2 2022 revenue to RMB 12.1 billion and a 4.5% YoY decline in net profit to RMB 1.04 billion. Considering the macroeconomic headwinds in Transsion’s core markets, the increase in revenue was a bright spot, especially compared with Q1 when the company posted a quarterly revenue drop for the first time since its market debut in September 2019.

Transsion Group Quarterly Revenue

Transsion’s Q2 smartphone shipments grew 4.1% YoY, an impressive performance despite a shrinking global market, which retreated 9% YoY during the quarter. Geopolitical tensions and high inflation rates have hurt the global smartphone market in general. Further, companies exposed to the low- to mid-end segments and emerging markets are more prone to secondary impacts, such as the strain on customers from high food and energy prices, weaker local currencies against the US dollar, and higher government taxes and levies on ‘non-essential’ imports like consumer electronics.

Transsion Group Q2 2022 Smartphone Shipments Analysis – Growth and Regional Contribution

Transsion defied these global trends through resilient performance in its Africa home market and strong growth in other regions, most noticeably in India and Southeast Asia. In both these regions, Transsion is ranked sixth in terms of shipments, helped by the company’s double-digit annual growth rate. Gaining a foothold in these new markets helps the company diversify its revenue sources and also allows the company to move up the pricing curve. According to Counterpoint’s Model Sales Service, Transsion’s smartphone average selling prices (ASP) increased 14% YoY, mainly driven by the success of the company’s TECNO and Infinix brands. The brands’ latest products received good market reception and are edging closer to the $150 mark.

Due to the increased pricing, Transsion’s Q2 normalized gross profit margin reached 22.9%, up 1.4% YoY, to reverse a six-quarter slump. However, the bottom line retreated, mainly due to a significant 40% increase in R&D spending. In our view, this is a positive sign that the company is moving out of its comfort zone of focusing only on pricing competitiveness in its African home market and committing to make more sophisticated products for the higher value markets.

Despite our positive commentary, we also recognize the significant challenges brought on by the macro environment, which is not likely to ease in the near term. In Q2 2022, we observed inventory challenges across handset and component makers, including Transsion. The company’s inventories reached RMB 9.6 billion as at the end of Q2, 27% higher than that in Q4 2021 and 73% more than in Q4 2020. Currently, inventory levels are 19% of the company’s 12-month trailing revenue, which could become an issue if it remains high or if revenue declines in the coming months.

We also note that the company’s recently announced stock options plan for 2022 is linked to its targeted 2024 financial metrics. The plan suggests that the company forecasts revenue and net profit to increase 15% and 32.25% respectively as a baseline case, or 20% and 44% respectively as a bull case by 2024. The targets are compared with the metrics from 2021, which was a strong financial year for Transsion, indicating that the company is extremely bullish about the next couple of years.

Growth Worries in Africa, India See First Revenue Drop Since COVID-19, But Diversification Efforts on Track

June 6, 2022

Transsion Holdings reported Q1 2022 earnings that saw revenues and net profit drop 1.8% and 7.6% YoY respectively. This is Transsion’s first revenue and profit drop since it went public in September 2019. The company’s performance during the quarter was impacted mainly by the stalled growth in its home market Africa and in India, which saw inflationary pressures hitting lower-income consumers significantly. Smartphone sales were down in the region for the first time since the pandemic. However, the company was cushioned by growth in other regions, and margins remained intact despite inventory build-up.

According to Counterpoint Research’s Market Pulse service, cumulative Transsion smartphone shipments reached 18.9 million units in Q1 2022. This was a small increase of 1.6%, the slowest YoY growth rate since the pandemic.

Transsion Group Quarterly Smartphone Sales

Looking further under the hood, there are significant regional disparities, however. In Africa, Transsion saw a 7% decline in smartphone sales in Q1 2022, mainly due to the inflationary impact on consumer sentiment. Most large African markets were already running double-digit inflation during 2021, but the Ukraine war had far-reaching consequences as food imports were hampered, affecting lower-income consumers more. Depreciating local currencies also put pressure on the company’s supply chain and margins.

In India, similar macro concerns and impact of the Omicron wave saw the smartphone market record the first Q1 drop ever. Here, Transsion smartphone sales dropped 22%. The market sentiment in India is expected to remain weak in Q2, but sales are likely to see growth due to the low base of Q2 2021 when the market was hit hard by the Delta wave.

On the other hand, Transsion had resilient performances in the Middle East and APAC, which show its diversification efforts are working. In both regions, the company is finding success in penetrating the entry-level segment in key countries like Pakistan and Bangladesh. Transsion’s 79% sales increase in APAC runs counter to the broader market. In the Middle East, the 18% sales increase is likely to extend further in 2022, as the region is expected to be the best-performing smartphone market due to the economic growth driven by oil revenue increases, mainly in Gulf Cooperation Council (GCC) countries.

Transsion Group Smartphone Sales by Region, Q1 2022 vs Q1 2021 (In million units)

Transsion’s normalized gross profit margins for Q1 2022 decreased to 21.4%, or 2% less than the same period in the previous year. Significant cost pressures persisted due to lingering supply chain disruptions, component shortages and high inventory levels. Rising revenues from other regions are also likely to cap the company’s margins, as it enjoys far higher margins in its home market Africa. However, Transsion now derives 87% of its revenues from the smartphone business, and as feature phone-to-smartphone migration continues for its emerging market customers, we see further room for the company’s revenues and margins to grow.

Transsion signs off 2021 in style: Smartphone market share continues to increase in emerging markets

April 28, 2022

Transsion Holdings reported 2021 results with revenues up 31.8% YoY and net profit up 45.5% YoY. These results were driven mainly by increasing smartphone sales and market share, which widened in the core African market, while achieving breakthroughs in key South Asian countries like Pakistan, Bangladesh and India. IoT and internet services, which accounted for 6.5% of the group’s revenues in 2021, also saw robust triple-digit growth.

According to Counterpoint Research’s Market Monitor service, cumulative Transsion handset shipments reached 184 million units in 2021, an all-time high. Smartphones, in particular, grew 61%.

 Transsion Group Handset Shipment and Revenue Analysis

Sources: Counterpoint Market Monitor Service, Transsion Group financial statements

Transsion continued to do well in its home market Africa, where it already dominates with close to 45% share across its three brands. However, Africa accounted for only half of the shipment increases in 2021. In India, Transsion almost doubled its smartphone sales in one year, while the company is already the biggest smartphone OEM in Pakistan. As such, Transsion smartphone sales attributed to Africa decreased from 67% in 2020 to 56% in 2021. A widening geographical footprint, accompanied by an enriched portfolio, can help the company diversify its customer base and increase its technical prowess.

The company also reported surprisingly good revenue growth from other businesses. Revenues not attributed to handsets, which mainly include IoT and internet services, grew 68% YoY to RMB 3.2 billion. Their contribution to group revenues now stands at 6.5%. This is due to new products in the wearables, TWS, notebook and TV categories. But more importantly, Transsion’s ‘Matrix of Internet Products’ became meaningful growth engines. Apps under the Transsion umbrella saw installations increase 240% YoY, with three apps – Phoenix, Boomplay and Scooper (with MAUs of 100 million, 68 million and 27 million respectively) – becoming main gateways to the internet for African users. User and eventually revenue growth from apps will become ever more important factors in Transsion’s future strategy, particularly in Africa, as its handset business will inevitably hit road bumps in the future.

Transsion IoT & Internet Services Analysis

Source: Transsion Group Financial Statements

Transsion’s normalized gross profit margins decreased to 21.3% for the year, after staying above 23% for the first three quarters of 2021. There were significant cost pressures in the second half of the year, especially due to supply chain disruptions and component shortages. We expect these issues to gradually ease in 2022 as the supply and demand dynamics in the semiconductor industry improve, and supply chains become more resilient to shocks. However, foreign exchange fluctuations and inflationary pressures in key markets will be the new destabilizing factors for the company, as risks shift from the supply to the demand side in the wider global handset market.

Transsion handset sales, profit continue to improve despite cost pressures

November 24, 2021

Transsion Holdings reported Q3 2021 results with revenues up 16% YoY and net profit up 33% YoY. These positive results were driven once again by further pivoting to smartphone sales, especially in the core African market. According to Counterpoint Research’s Market Monitor service, cumulative Transsion smartphone shipments surpassed 20 million units for the first time ever, coming in at 23 million. This represents a growth rate of 75% YoY.

 Transsion Group Handset Shipment and Revenue Analysis

While feature phone shipment growth moderated in Q3 2021, the bulk of Transsion’s revenue growth was driven by smartphones. Heading into the Q4 holiday shopping season and 2022, we may see Transsion’s smartphone shipments overtake feature phones for the first time.

Over the past couple of years, as Transsion smartphones penetrated more markets, the average selling price (ASP) saw a noticeable increase. While the ASP showed a mixed trend in the second half of 2019, it increased decisively during 2020 and is showing no signs of slowing down in 2021. Looking at Transsion’s brands closely, TECNO, itel and Infinix saw ASP increases of 56%, 43% and 29% respectively over the past 18 months. These point to positive consumer sentiment and changing perception of digital and mobile services. More consumers in emerging markets now recognize that a decent smartphone is an important component of their daily lives.

Transsion Group Smartphone Average Selling Price ($)

Transsion’s normalized gross profit margins increased to 25.3% in Q3, compared to 25% in Q2 and 23% in Q1. The company managed to navigate the ongoing component shortages well and was able to pass upstream cost increases to consumers. Selling, General & Administrative (SG&A) expenses and financing costs dropped as well. Furthermore, ventures outside sub-Saharan Africa, including in higher value markets in Southeast Asia and the Middle East, contributed to higher profit margins. Profitability may increase further as the supply chain situation stabilizes in 2022.

Smartphone Sales and Profitability Double Boost as Company Diversification Efforts Gather Pace

September 30, 2021

Transsion Holdings continued to see strong performance in H1 2021 with revenues and net income growing 65% and 59% YoY respectively, driven primarily by surging handset sales in its home market Africa, as well as successful ventures in other developing countries. According to Counterpoint Research’s Market Monitor service, cumulative Transsion smartphone shipments in H1 2021 reached a record high of 37.3 million, taking the company’s share in the global smartphone market to 5.5% from 3.5% a year ago.

Looking at Transsion’s overall product strategy, we can see that it is shifting materially from feature phones to smartphones in response to market changes. In 2019, 33% of the company’s handsets were smartphones, but in the latest quarter this number has gone up to 47%. In the company’s latest earnings release, smartphones account for over 80% of its revenues, a record high.

Commenting on Transsion’s commitment to smartphones, Senior Analyst Yang Wang said, “Transsion is rapidly transforming and upgrading its product portfolio. The move is driven by the accelerating demand for internet-capable phones in its home market Africa, where the COVID-19 pandemic showed the value of the internet to consumers who were forced to stay at home. The region’s internet and mobile money services are also gathering steam along with a significant drop in data costs. While all OEMs stand to benefit from the consumer’s shift, Transsion gains the most as its distribution and pricing strategies are most ready to tap into new consumer clusters, which previously did not consider buying a smartphone.”

Apart from product transformation, the other significant shift in the Transsion strategy is geographical diversification. Compared to two years ago, Transsion’s share of smartphone shipments in the Middle East and Africa (MEA) region has dropped from 83% to 68%. On the other hand, shipments have increased rapidly in APAC countries such as India, Pakistan, Bangladesh, Indonesia and Thailand. India specifically has been the growth engine for Transsion, with shipments almost reaching 20% of the company’s global total in H2 2020, before the Delta wave halted the progress.

Commenting on Transsion’s moves in India, Senior Analyst Prachir Singh said, “Transsion brands, especially TECNO, have been focusing on a hybrid channel strategy in India, with an increased emphasis on online channels. This was executed with great success as Transsion brands contributed to 7% of the online smartphone market in India in Q2 2021, compared to 2% in Q2 2020. TECNO’s online smartphone shipments grew almost 20x YoY in Q2 2021, while itel increased its online share by launching online exclusive models like the Vision 1 Pro and A47. From a product positioning point of view, Transsion brands have been focusing on providing specs like higher display size, multi-camera capability and bigger battery, which are the top spec preferences for consumers in the sub-$150 segment.”

Going forward, Transsion’s fundamentals are expected to remain solid, as it continues to hold enormous clout in its Africa home market. Smartphone penetration will gradually expand, with new users continuing to be brought into the internet world. On the other hand, Chinese brands such as Xiaomi, OPPO and vivo are strengthening their market penetration efforts in certain African markets to address the medium-range segment (<$200). This price band is above Transsion’s typical playing field, so the newcomers are unlikely to affect its market share in the short term. However, we have seen in recent years Transsion’s effort to produce more premium phones and enter the <$200 price band. Therefore, there may be a time in the future when Transsion competes directly with the likes of Xiaomi, OPPO and vivo.

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9. Xiaomi Updates: Q3 2022

The post Transsion Quarterly Updates appeared first on Counterpoint.

POCO was carved out of Xiaomi as an independent brand in early 2020. As Xiaomi seeks to expand its product coverage, it has now defined the Xiaomi (previously named Mi) series as the one meant for the high-end market. Then comes the Redmi series with its focus on budget options. POCO attempts to fill the gap between Xiaomi and Redmi series by offering ‘affordable premium’ models.

Similar to other smartphone manufacturers’ practices, POCO has its own management to deal with product development, P&L, sales and marketing. However, it shares resources with Xiaomi for R&D, supply chain, manufacturing and after-sales service. This reliance on Xiaomi for supply chain and manufacturing is especially important given the current industry-wide semiconductor shortages, as without the entire parent group’s weight, it would have been difficult and uneconomical for POCO to source ‘Tier 1’ components.

POCO now has four product series — F as the most premium, C and M for budget models and X for the gap between F and C-M. The POCO brand has always identified itself with one target audience – tech enthusiasts looking for premium specs at affordable prices. The POCO F3, which was launched in March 2021, is the most expensive POCO model to date. While cheaper variants are mainly being sold in India now, wider availability, along with more premium models, is expected in international markets in the coming days. The device is already one of the best-selling models in China, though, as a caveat, it is marketed there as the Redmi K40 along with two enhanced versions – Redmi K40 Pro and Redmi K40 Gaming.

According to Counterpoint Research’s Model Sales Tracker, sizeable market penetration has been witnessed for the POCO brand in APAC, Europe and MEA regions over the past year, reducing reliance on the India market at the same time. We think this move is meaningful and unlikely to be a blip because the increase in penetration in these regions coincides with Xiaomi’s overall strategy during the past year, which is to broaden both the portfolio and brand footprint. In fact, POCO has more than exceeded Xiaomi’s own lofty performances in the past year and half – with sales achieving a 123% increase in the first eight months of 2021, as compared to 73% for the entire group.

Looking at the price range and sales channel of POCO products, they were found to be closely matching Xiaomi’s overall numbers in different regions. As such, it is not difficult to imagine POCO actually following Xiaomi’s overall strategy, despite lower volumes as compared to the Mi and Redmi series. Notwithstanding the varying degrees of sophistication across markets, the POCO brand seems to have captured a sizeable niche market. Having four product series also helps the brand cover a wider range of price points and needs of customers.

POCO F3 Long-term Review

We have been using the POCO F3 for about five months, giving us a closer look at how the device would fare on a day-to-day basis and after systems updates.

Impressive specs

• Qualcomm Snapdragon 870 5G (7 nm) processor
• Sub-6GHz 5G support but no mmWave
• 6GB/8GB RAM, 128GB/256GB storage (no expandable storage)

Positioned in the tightly contested mid-range 5G segment, the POCO F3 is packed with noteworthy features at an equally eye-catching price point. This compares favorably with models in the range.

Looking at the POCO F3’s features, the one thing that stands out is the Qualcomm Snapdragon 870 5G chipset, which makes regular appearances in rival flagship models such as the vivo X60, OPPO Reno 6 Pro and Motorola Moto G100, all priced above $500. The Qualcomm Snapdragon 870 5G chipset has a prime core that can achieve up to 3.2GHz of clock speed. With the Adreno 650, it also packs one of the most powerful GPUs around. With a polished design, fast-charging battery and a 6.67-inch AMOLED display featuring 120Hz refresh rate, the POCO F3 appeals to tech enthusiasts looking for all-round entertainment, particularly gaming experience.

Slick, Mirror Finish but A Fingerprint Magnet

• Corning Gorilla Glass 5 protection on both front and back
• IP53, dust and splash protection
• Glossy finish

The most immediate first impression of the POCO F3 is the curved glossy back, which looks impeccable. It is clear that the design tries to woo tech-savvy and demanding gadget players. We obtained the Night Black version (Arctic White and Deep Ocean Blue are also available), and the strong reflection from the back almost makes it double up as a mirror when the surface is clean. However, this super-glossiness is a magnet for fingerprints and looks terrible when not clean. This also goes against the prevailing trend of major OEMs mostly opting for a matte finish.

The POCO F3 uses Corning Gorilla Glass 5 on both sides, with a not-so-thin curved plastic frame, sprayed with grippy paint that feels metallic. We were delighted with the side-mounted fingerprint sensor that is built into the power button. It is extremely fast compared to the mixed experiences we had with other models opting for under-display sensors (optical). These are mature designs, a clue that the device isn’t a premium flagship model. But it has a fairly pleasurable hold and manifests design character.

Good camera performance for its price

• Triple rear camera setting
  • 48MP, f/1.8, 26mm (wide), 1/2″, 0.8µm, PDAF
  • 8 MP, f/2.2, 119˚ (ultrawide)
  • 5 MP, f/2.4, 50mm (macro), 1/5.0″, 1.12µm, AF
• Selfie camera: 20 MP, f/2.5, (wide), 1/3.4″, 0.8µm

For a device in the sub-$400 range, the POCO F3 cameras perform fairly well. They can capture some stunning shots under the right conditions.

Below are some photos shot from the primary camera in daylight conditions. Overall, the sensor seems to have captured enough detail, and the contrast is also crisp. However, upon closer inspection, high-frequency detail such as the hair on the teddy bear and the pores on the fried chicken skin look sullied and over-processed.

The following photos were taken during strong daylight (around mid-day). No AI function was used (though the camera app comes with the AI function, which can automatically detect objects such as grass, flowers, trees and buildings). The photos look decent under the right settings, and qualify for most social media purposes.

We then took some close-up shots, with mixed results. In the samples below, while colors are well preserved, the same cannot be said of the details. In particular, edge detection looks weak. The algorithms that are supposed to separate the background from the foreground seem to be off.

Portrait selfies, however, do a much better job. The first shot had AI and HDR off while the second one had them on. Curiously, while the AI has smoothened the skin, details on facial hair and the shirt have become sharper. There were also no problems with recognizing the background from the foreground. Overall, the selfie quality is surprisingly good.

We then took photos at night. The pairs of photos below were taken with default settings and low-light mode. In short, the low-light mode is able to capture much more details without unnecessarily distorting the contrast. The quality of details takes a noticeable hit in the default mode, but no such issue is observed in the low-light mode.

Therefore, we conclude that the POCO F3 cameras perform as expected and are in line with similarly priced competitors. However, under the right conditions, they can take good photos, such as the one below, which was taken with default settings.

Superb display enables smooth gaming experience

• 67-inch AMOLED, 120Hz refresh rate, HDR10+, 1300 nits (peak)
• 1080 x 2400 pixels, 20:9 ratio (~395 ppi density)

The POCO F3’s display is probably the biggest selling point. At 6.67 inches, this AMOLED screen is huge but necessary these days for a prime gaming experience. At 1300 nits peak, the screen is very bright (sometimes too bright at night), and the color saturation is decent at all brightness levels. The screen resolution is the typical extended 1080p. But with better positioning of the punch-hole camera, the visual ‘real estate’ has not been compromised.

The POCO F3 supports 120Hz refresh rate and 360Hz touch sampling. The refresh rate does automatically adjust between these two frequencies depending on the app, but for the sake of saving battery, we manually had it on 60Hz default for most of the day except for games and videos.

In the video below, we played Honor of Kings under 90Hz refresh rate at 60fps frame rate – the top video quality available for this game. Overall, the quality of the video was great, able to reflect finer details such as the flapping movement of our character’s robe and the movement of the minions. Most encouragingly, video quality consistency is on display at the 0:35 mark, where our character performs a rushing move when multiple objects are in view, and the 0:45 mark, when multiple characters are performing dynamic actions. The performance was stable throughout the game as the display rarely deviated from the targeted 60fps frame rate (seen at the top right of the screen).

For comparison, we played Call of Duty: Mobile. The game was played under 60Hz as the higher 120Hz is only available on the Sony Xperia 5 II. While we did fairly well and killed four opponents in the sample, you can see that the smoothness of the video quality takes a dive compared to the previous sample, especially in near-field dynamic environments, such as nearby objects when moving the cursor and zooming in to shoot.

Another interesting gaming feature is the Game Turbo mode. It allows the device to automatically detect ongoing gaming sessions, and can stop notifications and calls. Additionally, one can slide open the menu the top left of the screen to see further features. Useful ones include GPU, CPU and FPS performances, as well as memory boost, screenshot and video recording. One can even access other apps through a pop-out screen – useful for filling moments of inactivity when playing ‘idle’ games. 

Perhaps one drawback of the POCO F3 screen is that it can dim unexpectedly under very bright sunlight, probably due to overheating and subsequent thermal throttling. However, it can be fixed by manually adjusting the brightness. We experienced this issue 3-4 times in the first month but much more frequently in subsequent months.  This is consistent with the complaints seen on Xiaomi forums.

Dual speakers with Dolby Atmos add to entertainment value

The POCO F3 has a pair of decent speakers in the earpiece and at the bottom of the phone, with Dolby Atmos surround sound solution providing the loud audio experience of true stereo. While a hand may cover the speakers when playing a game or watching videos in the landscape mode, we found the speakers doing a good job at projecting sound. We tested the phone in the shower (tightly sealed of course as the phone comes only with an IP53 rating) and even received calls on the speaker in busy shopping malls – with positive results.

There is a range of equalizer options (see below) for those with particular tastes in audio experience. We streamed a range of music from Spotify and concluded that the POCO F3’s speakers projected a decent range, especially at mid-tones. However, the sound seems to be slightly distorted at the highest volume.

Reasonable battery and charging performance, more would be nice

• 4520mAh battery
• Fast charging 33W, 100% in 52 min (advertised)

The POCO F3 has a battery of 4520mAh, which is decent at its price range. We saw about eight hours of screen-on time on 60Hz and five hours on 120Hz on 4G connectivity (numbers based on the Screen Time App). However, the apps used were somewhat less ‘intensive’ than what one would find in a typical product review test, and more representative of one’s general daily usage. In our view, the battery will probably be just enough for a day’s average usage, but a power bank or charging wires are a must if one plays games or watches videos during the day.

Luckily, the POCO F3 comes with a 33W adapter, which charges around 66% in 30 minutes and 100% within an hour. However, the slight drawback is that playing games on 120Hz while charging can lead to overheating, as seen below when the battery reached 44°C. Inevitably, we experienced some lags while using heavy payload apps like gaming or AI photography.

Software is a huge drag on performance

Now we come to the biggest disappointment in the POCO F3. The device runs on Android 11 with the MIUI 12 skin. The customization is pretty thorough, and the POCO launcher uses a fairly distinct system theme, which can be changed. One of the key alterations is a redesigned app drawer, which has fewer rounded corners and automatically sorts apps into different categories. The first page still displays a vertical list of everything you have installed, but it takes a bit of getting used to. We have avoided navigating for apps in the categories view (Communication, Entertainment, Photography, etc.) as much as possible, due to the confusing sorting of some of the apps.

Compared with other Android competitors, the MIUI takes a fair amount of effort to get its settings sorted out. This may not be an issue for tech-savvy users or those with previous experience of using MIUI, but it is an unnecessarily high barrier for average users looking for a simpler experience. Furthermore, the range of bloatware is alarming. The POCO F3 also has its own clock, calculator, voice recorder and music player – none of which can be uninstalled. The system frequently pushes notifications to update these, which we strongly advise against.

Xiaomi users are fairly active on online forums, and MIUI bugs tend to be quite frequent. Disappointingly, this is a legacy issue that works hugely against the brand, which it seems unable to rectify. With the POCO F3, there is the possibility of upgrading to Android 12, but we do not expect a major boost to the phone’s performance.

In summary, while the hardware in the POCO F3 packs a punch, the bottom line is that software does not do the hardware justice, and the phone is powerful only on paper.

Conclusion: A value-for-money smartphone for tech-savvy users and gamers

The POCO F3 inherits the brand family DNA with top-notch design, excellent display and gaming performances, which will no doubt attract techy-savvy customers who know exactly what they are looking for. Its flagship chipset, the Snapdragon 870 5G, and the AMOLED screen with 120Hz refresh rate will be especially popular among its targeted buyers. While we have found the phone to be fairly reliable in terms of day-to-day general usage, the software weakness can be frustrating for the average user. Despite this, if one can bear with the fidgety initial setting-up processes, the phone is capable of doing its job.

The post POCO F3 Long-term Review: Attractively Priced ‘Flagship Killer’, But Some User Experience Compromises appeared first on Counterpoint.

The decisions related to China’s tech policy at these sessions received enormous attention from both domestic and international observers, especially given the context of the tech war between China and the US, as well as the global supply chain constraints exposed during the COVID-19 pandemic. In the longer term, countries will be looking over their shoulders to understand other players’ policies and roadmaps, as tech interdependence gives way to tech resilience and independence.

Before delving into the policies discussed and finalized during the Two Sessions, it is important to emphasize that a single authoritative ‘plan’ rarely drives China’s technology initiatives. Instead, headline announcements are merely directives or top-level ‘gestures’ which are then followed by detailed local plans from a myriad of agencies and local government bodies.

Increased R&D Spending

The headline that grabbed everyone’s attention was the pledge to increase R&D spending by more than 7% per year between 2021 and 2025. This will also take the share of R&D spending to a higher percentage of the gross domestic product (GDP) than in the previous five years. China’s spending on R&D climbed 10% to 2.44 trillion yuan ($378 billion) in 2020, accounting for 2.6% of GDP. The country’s R&D budget eclipsed the EU’s budget last year and is projected to reach the US’s 2018 levels (the most recent year for which the data is available) by 2025.

From ‘Made in China 2025’ to ‘Sci-Tech Innovation 2030’

The ‘Made in China 2025’ plan received a huge backlash from American and European policy circles, and signs are that the policymakers in China have decided to all but shelve it. On the other hand, the ‘Sci-Tech Innovation 2030’ strategy gained momentum in 2020 and received significant coverage during the Two Sessions. The strategy is part of a broader roadmap to enable China to become a leading global innovation engine, catch up with the average income level of developed countries, and showcase strength in areas like the economy, global governance, soft power and green development.

Resources and policy priority will be given to seven critical areas – artificial intelligence, quantum computing, integrated circuits, aerospace, neuroscience, genetics and biotechnology research. Some of these also happen to be among the sectors most severely impacted by US sanctions in the past few years.

Modernization of Industrial and Technology Supply Chains

One of the strong points of the Chinese economy in 2020 was manufacturing, with the country turning in record-high trade surpluses – 2.117 trillion yuan ($325 billion) just in the last three months of 2020. Policymakers in China are doubling down on investing considerable bureaucratic and financial resources on upgrading and digitizing the country’s already-dominant manufacturing base, focusing on building a more resilient and flexible industrial chain as an important foundation for the economy.

Initiatives such as computer vision, robotics, clean energy, autonomous vehicles, cloud computing and 5G have been recognized as crucial to increasing the efficiency and productivity of factories across the country. Some of the first steps include the development of basic common standards in platforms, networks and security, and realizing data interconnection and intercommunication between platforms and industrial apps.

Recognition of ‘Digital Infrastructure’ as Strategic Initiative

The phrase ‘New Infrastructure’ gathered momentum among policymakers and observers in the second half of 2020. The 2020 stimulus package eventually included a significant amount of infrastructure spending, it focused on ‘digital, smart and innovative infrastructure’ and refrained from repeating errors similar to the ones committed a decade ago.

At the 2020 Two Sessions, the NPC introduced a digital infrastructure public spending program of around $1.4 trillion. The new infrastructure includes seven key areas: 5G networks, industrial internet, inter-city transportation and rail system, data centers, AI, ultra-high voltage power transmission, and electric vehicle charging stations. During the 2021 Two Sessions, more policy guidance, public and private participation methods, and use cases have been announced.

For detailed analysis of these topics, please refer to the full report China’s ‘Two Sessions’: Spotlight on Supply Chain Resilience and Next-Gen Technologies.

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5. Why Tech Should Follow Geopolitics in 2021

The post China's 'Two Sessions’ See a Great Wall of Supply Chain Resilience, Next-Gen Technologies appeared first on Counterpoint.

Smartphone sales had plateaued for several years in the Middle East before 2020. At the start of the year, most Middle East economies had been under pressure due to years of depressed oil prices, weak services sector growth and rising sovereign fiscal deficit. Several countries enacted diversification plans to cut dependency on energy revenues even as reduced subsidies, higher taxation and structural reforms repressed consumer sentiment.

The largest smartphone markets in the region also faced idiosyncratic difficulties. Turkey, the region’s largest market, had seen five successive hikes in its imported smartphone registration charge in 2019, with the latest rate at Turkish Lira 1,838 ($310). Demand was further depressed due to the Turkish Lira depreciating 45% between the start of 2020 and end of October. Saudi Arabia, the region’s second largest market, effected a VAT hike from 5% to 15% in July to offset the impact of lower oil revenue on state finances, which depressed smartphone sales through the second half of 2020.

Supply chain disruptions caused by COVID-19 were already leading to weak smartphone sales in Q1 2020. By Q2, sales plummeted due to physical store closures mandated by lockdown measures across the region. In addition, consumer sentiment was severely dented by a two-month oil price war between Saudi Arabia and Russia that saw Brent oil prices fall from around $65 per barrel at the start of the year to $18 by the end of April. In Q3, however, the smartphone market recovered strongly with the lifting of lockdown measures. Counterpoint expects Q4 smartphone sales to continue to trend higher in a typically strong quarter and grow by mid-single digits QoQ. The market will be aided by most countries having dodged the second wave of COVID-19, the launch of the iPhone 12 series, and aggressive channel strategies by Chinese vendors.

The Middle East smartphone market has been through significant consolidation in recent years. As of Q3 2020, the top five brands accounted for 80% of the market, compared to 64% at the beginning of 2017. Samsung is by far the biggest smartphone vendor in the region, covering a wide range of products across all price levels. The sales decline of flagship models in the earlier part of the year was cushioned by the successful budget range Galaxy A series. Huawei, the region’s second biggest brand, saw sales decline throughout the year due to a mixture of supply chain challenges and component unavailability because of the US sanctions. The biggest beneficiaries of Huawei’s loss were Xiaomi and OPPO, which both saw significant market share growth on the back of aggressive market entry initiatives, especially in Turkey, Saudi Arabia, UAE and Israel. Apple also saw market share loss throughout the year, mainly due to squeezed consumer sentiment and the delayed launch of the iPhone 12 series. However, Apple is expected to bounce back strongly in Q4 following the long-awaited launch.

The average selling price (ASP) of smartphones by Q3 2020 was only 70% of the level at the beginning of 2017. While premium models struggled, budget-friendly models like the iPhone SE 2020, Samsung Galaxy A series, Xiaomi’s Redmi series and OPPO’s A series all outperformed. At the lower end, the market for entry-level smartphones priced below $150 was supported further by operator plans across the region, notably in Bahrain, Saudi Arabia and the UAE, which took concrete steps to shut down their 2G networks. Smartphone shipment gains came at feature phones’ expense, whose drop gathered pace in 2020 at a YoY rate of around 35%.

2020 also saw the launch of the first 5G capable smartphone models in the region, albeit mostly in the above $600 range. Currently, seven countries – Bahrain, Israel, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE – have commercially available 5G networks. With the hype created by the iPhone 12 series launch, and cheaper 5G models from other brands, we can expect 5G subscription and device adoption to gather pace in 2021.

Counterpoint expects the Middle East smartphone market to rebound by 10% YoY in 2021 and reach pre-pandemic sales levels in 2022. In the new year, we expect some of the favorable developments that emerged in late 2020 to gain traction. The successful rollout of the COVID-19 vaccination drive across the world can resume travel, which will cushion oil prices and support the services sector recovery in the region. Premium smartphone brands like Apple and Samsung will benefit from new product launches while the Chinese vendors will continue market penetration drives, leading to increased sales across the region.

We expect more countries in the region to offer 5G services in 2021, with Iran, Turkey and Lebanon the likely candidates. Further, we expect the 5G subscriber base to increase from around 1.5 million by the end of 2020 to 10 million by the end of 2022, and 5G capable smartphone sales to increase from around 5 million in 2020 to 13 million in 2021.

*This blog classifies the Middle East region as the following countries: Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates and Yemen.

The post Middle East Smartphone Market Sees Light at the End of 2020 Tunnel appeared first on Counterpoint.

Transsion Holdings Stock Performance at Shanghai Stock Exchange, Sept 2019 – Nov 2020

Transsion Holdings defied expectations when it reported revenue of RMB 25 billion ($3.77 billion) and income of RMB 1.95 billion ($295 million) in the first three quarters of 2020. These numbers are 48% and 50% higher than their respective performances in the first three quarters of 2019, an impressive feat despite the supply chain and distribution challenges posed by COVID-19. So far, the company’s unique approach of low pricing, localization and mass marketing, and a three-pronged brand strategy has paid off in Africa, a notoriously fragmented market.

Source: Transsion Holdings Investor Relations

Africa – A Market Overlooked

Global mobile phone giants like Nokia and Samsung have traditionally brought models that were designed for developed world consumers, to big African cities without looking in-depth at the economic realities and customer needs. From early on, Transsion’s business strategy would circumvent the big cities and target lower-tier cities and rural areas. To build the brand, the company would spend heavily on distribution, sales and marketing, and adjust campaigns and go-to-market activities to different regions’ realities. To gain local knowledge, Transsion would even send managers from its headquarters in China to live and work in remote African locations for extended periods of time.

The African technology sector has seen tremendous change in the last decade, driven by infrastructure as well as social factors. Many countries are no longer technology barren lands, as steadfast urbanization and widening mobile network coverage (see below) laid the foundation for rapid smartphone adoption.

Urban population (% of total population)

Sub-Saharan Africa Population Covered by a Mobile Broadband Network (3G and Above)

Adults Who Use Internet or Own a Smartphone

Source: Pew Research Center

According to a Pew Research Center survey (see above) carried out in six African countries, education and age were far more important factors in determining smartphone ownership and internet usage than other prominent socioeconomic variables like income and gender. Using the internet via a smartphone requires a certain level of literacy (which, at 2 out of 3 adults according to World Bank, isn’t a given across Africa). Doing so regularly requires a reliable electricity supply, which is not always readily available. Consequently, young, educated and urban residents have been the first wave of smartphone adopters. We expect the same enlarged pool of consumers to drive smartphone and internet adoption in the future. The African population in the 20-39 age group is expected to increase to 506 million, or by 30%, in the next decade (Source: UN’s Department of Economic and Social Affairs).

Recent performances

After more than a decade in operation, the bulk of Transsion’s business comes from three established mobile phone brands – TECNO, Itel and Infinix. Collectively, the three brands represent 38% of smartphones and 67% of feature phones shipped in Africa in Q3 2020, topping both Samsung and Huawei, according to the Counterpoint Market Monitor service. More specifically, Transsion dominates the low-price segment – the three brands together account for 45% of shipped devices priced below $100, in Q3 2020.

_______________________________

What are the key success areas of Transsion? How has it applied big data and user insights to produce superior products? What are Transsion’s content strategies for a very different group of African internet users? What has the company done right in terms of distribution, after-sales and marketing, something which has eluded many competitors that have tried to enter the market?

To find answers to these questions, please refer to the full report Transsion Holdings: Ascent of Africa’s Smartphone King.

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5. Transsion Led the Kenya Smartphone Market in Q1 2019
6. Transsion Led the Kenya Smartphone Sales in 2019

The post Transsion Continues to Ascend in Africa’s Mobile Handset Market appeared first on Counterpoint.

(Update: On November 3, the Shanghai Stock Exchange halted Ant Group’s IPO, citing a “significant change” in the regulatory environment)

This Ant is Big

In contrast to the lexicology of the company name, Ant Group is one of the biggest technology and financial services companies in China and the world. As of Q1 2020, the company had 1.3 billion registered users globally and served over 80 million merchants. Alipay, the third-party mobile and online payments platform owned by Ant Group, processed RMB 118 trillion ($17.6 trillion) digital payments during the 12 months ended June 30, 2020, which is roughly over 55% of online payment transactions in China. Alipay enjoys a duopoly position in China together with Tenpay, a payments service incorporated in the popular messaging app WeChat, owned by Tencent Holdings. The two services account for 94% of mobile payments in China.

Despite its size, Ant Group runs on an ever-expanding racecourse. In Q2 2020, mobile payments increased 27% YoY, accounting for 30 billion transactions, or more than half of non-cash payments in China. We expect mobile payment transaction values to continue to grow at mid-teen annual rates by 2025.

Snapshot of Ant Group’s Size and Scale 

(Source: Part of ‘application proof’ published by Ant Group to meet the requirements of the  Stock Exchange of Hong Kong and the Securities and Futures Commission)

Putting User at the Center of Growth

(Source: Part of ‘application proof’ published by Ant Group to meet the requirements of the  Stock Exchange of Hong Kong and the Securities and Futures Commission)

The beginning of what eventually became Ant Group was made in 2004 alongside Alibaba (both founded by Jack Ma), in the nascent days of e-commerce. Alipay was conceived as the payment gateway of Taobao, the B2C e-commerce platform of Alibaba Group. Alipay was to be the crucial cog in solving the trust issue between buyers and sellers in online transactions. As Taobao took off with Chinese consumers embracing e-commerce, backed by rapid urbanization, infrastructure improvement and widening internet adoption, Alipay also caught on the rising momentum of mobile commerce, and became the dominant payment method within Alibaba’s marketplaces and even beyond – other online and offline ecosystems and eventually physical stores.

Alipay’s strength lies with user experience, including a superior payment authorization rate, boosting convenience and reliability. The fact that all the services (more on this below) are embedded in one app means that take-up is hassle-free for even an entry-level user. Alipay charges a merchant fee of about 0.6% on transactions, which is less than the typical 1% charged by debit cards. This lowers costs for consumers and merchants alike.

Alipay as One-stop Shop for Digital Payment and Digital Finance Services

(Source: Part of ‘application proof’ published by Ant Group to meet the requirements of the  Stock Exchange of Hong Kong and the Securities and Futures Commission)

As the Chinese consumer class blossomed (see chart above) and transactions picked up, Alipay’s deposit pool started accumulating cash in big amounts, sufficient enough for the company to think of a way to benefit shoppers when they were not shopping, besides enhancing user stickiness. In 2013, the company launched Yu’ebao, a money market fund that offered superior interest rates than banks. This was the first step to expand beyond just payments and into a full-fledged financial services behemoth – Ant Financial – that provides services like virtual credit card, wealth management, insurance, foreign exchange, securities trading, micro-loans, credit filing and rating, and identity verification. The company is further branching out to emerging technology in areas such as block chain, cloud computing and artificial intelligence.

Why was Ant Group capable of such extraordinary growth? The answer lies in the market realities of financial institutions over a decade ago. Back then, visiting a bank in China was hardly an enjoyable experience. It involved heaps of paperwork, long queues, and dubious stares and questioning by the staff for even the simplest tasks. To many, instantaneous access to money via Alipay and Tenpay was a far more superior experience, leading them to consider mobile money platforms, not banks, as the go-to place for financial life. As the market evolved, the duopoly consolidated market power in online payments, while simultaneously bringing competition to the wider Chinese financial industry. They have forced the mainstream state-owned financial institutions to become more like Alipay and Tenpay – platforms that are data-driven, with enormous scale built on network effect and negligible marginal cost of cross-selling, so much so that even the UIs of bank mobile apps are converging on those of mobile money providers (see below).

Convergence of Mobile Money and Bank Apps

(Left – Alipay app’s home tab; Right – Bank of China app’s ‘lifestyle’ tab)

Home Sweet Home

Over the past month, there has been a rumour that the Trump administration is seeking restrictions on Ant Group over concerns that its digital payment platforms threaten US national security. For what the allegations are worth, we do not think they will pose a material risk to Ant Group’s operations, bottom line or the IPO, simply because the company’s focus is on the domestic market and it has a limited international exposure. Ant Group recorded RMB622 billion worth of international transactions in the year ended June 30, 2020, or 0.53% of the total.

We have seen Ant Group venturing modestly abroad in recent years, mainly in the payments arena, and mainly following Alibaba’s global expansion footprint (as of today, Alibaba has a 33% stake in Ant Group). It has launched e-wallets in 10 countries (mostly in Southeast Asia and South Asia), as well as striking partnerships that allow its payments to be accepted in 56 countries.

Ant’s international strategy can be broadly summarized in three areas: consumers purchasing internationally, merchants selling internationally, and international travellers. In our view, these represent ‘bolt-on’ services for Chinese consumers/merchants conducting transactions with a foreign counterpart, rather than a substantial strategic venture abroad. Therefore, these initiatives are unlikely to contribute materially to Ant’s bottom line, especially as international commerce and travel continue to be in the doldrums due to the COVID-19 pandemic.

The post Ant Group: Behemoth on an Ever-expanding Racecourse appeared first on Counterpoint.