Industry Trend Analysis - Local Manufacturing Key To Transsion's Smartphone Foray - SEPT 2017


BMI View : Low total cost of ownership (TCO) thresholds in Bangladesh are the biggest barriers to market entry for the majority of Asia ' s premium smartphone manufa cturers. E stablish ing a local manufacturing facility will benefit Transsion ' s budget brand devices m ost in the short to medium term, but the upside risk is that - in the longer term - customer loyalty will see consume rs switching to premium models.

Transsion Holdings has launched three TECNO-branded smartphones - including the camera-and-social media-optimised Camon CX Air - in Bangladesh. The devices are targeted at the large youth market and will capitalise on growing usage of social media services. We forecast annual handset sales to rise from 33.4mn units in 2016 to 38.2mn by 2021, as customers migrate to the country's new 4G networks, so this is an attractive market for new brands seeking to establish themselves. However, the high TCO of the TECNO handsets means that Transsion must look to keep costs as low as possible while it builds customer loyalty. Setting up a local manufacturing facility will help.

Trade data show that almost 75% of handsets imported into Bangladesh in 2016 came from suppliers based in Hong Kong and China, unsurprising given that US dollar appreciation has stunted demand for global brands. As a Hong Kong company sourcing components from Chinese suppliers, Transsion will be competing with a large number of other Chinese vendors, many of whom will be selling low-cost basic smartphones that match consumers' TCO profiles. But, a local production facility will enable it to sell premium devices at a lower price point as it will be able to factor out import duties and sales taxes applied to foreign-made goods. It would also be able to set up favourable supply agreements with the country's mobile network operators and ensure that its products are well promoted as part of affordable data usage plans. Even so, selling premium products in this heavily taxed market will remain a challenge.

Chinese Brands Dominate
Bangladesh: Handset Import Trends, 2012-16
Source: Trade Map

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