Here's a fun fact: when most of us talk about mobile phones, we're really talking about smartphones. That's the reality in Western markets and even in places like China. But venture into Africa or other developing markets, and you'll find a completely different story. Those basic feature phones from the pre-smartphone era? They're still everywhere, and they're still big business.

That's the world where Shenzhen Transsion Holdings Co. Ltd. (688036.SZ) made its fortune. Over the past decade, the company built a global empire by selling basic mobile phones to Africa and other emerging markets that bigger brands largely ignored. Today, Transsion ranks as the world's fourth-largest smartphone maker by units sold. Now the company wants to raise fresh capital with a Hong Kong listing, and the timing is interesting, to say the least.

Transsion filed for its Hong Kong listing last week, following July reports that it was planning an IPO to raise up to $1 billion. The new listing would complement its existing presence on China's A-share market in Shenzhen, which mostly serves domestic Chinese investors. A Hong Kong listing makes strategic sense for Transsion, given that the vast majority of its sales happen outside China anyway.

For most of its life since its 2013 founding, Transsion was a rocket ship. The company grew at breakneck speed by targeting markets that major brands neglected, starting with Africa. But lately, things have gotten rough. Other major players, many of them also Chinese, have started eyeing those same markets to fuel their own growth.

The Smartphone Transition Problem

Making matters more complicated, Transsion is navigating a tricky transition from feature phones, which still make up the majority of its unit sales, to smartphones that are rapidly gaining ground in emerging markets as technology improves and prices drop. While Transsion clearly dominates the fast-disappearing art of making good feature phones, it faces far more competition in smartphones from names like Xiaomi (1810.HK), Vivo, and Oppo.

"The best thing about Transsion is its large user base in the entry-level segment, which currently accounts for over 40% of global smartphone shipments," said IDC analyst Will Wong. "Transsion's strong footprint in emerging markets, such as Africa, gives it an advantage as local users increasingly seek device upgrades."

The company is the brainchild of founder Zhu Zhaojiang, 52, who learned the mobile phone business at Ningbo Bird, an early star in China's mobile phone market. Zhu, who goes by the English name George, still runs the show at Transsion with 67% of the company's voting rights. His instincts clearly served the company well during its feature phone glory days, but whether he has the skills to successfully transition Transsion into the smartphone era remains an open question.

The market has noticed the company's recent struggles. Transsion's Shenzhen-listed stock has dropped 28% this year, a stark contrast to its closest listed peer, Xiaomi, whose shares are up about 21% year-to-date.

The Numbers Tell a Tough Story

Despite its difficulties, Transsion still holds a respectable position on the global smartphone leaderboard. According to IDC, it was the world's fourth-largest smartphone seller in the third quarter of this year with 9% market share by units, trailing only Samsung (005930.KS), Apple (AAPL), and Xiaomi. But here's the catch: its revenue is far lower than those three because it focuses on the budget end of the market. And that revenue has been sliding as emerging markets make the switch from feature phones to smartphones.

The company's revenue fell 16% year-over-year to 29.1 billion yuan ($4.1 billion) in the first half of this year from 34.6 billion yuan a year earlier, reversing 10% growth for all of 2024. Compare that to Xiaomi, which saw revenue jump 38.2% year-over-year in the first half of this year to 227 billion yuan—nearly eight times Transsion's figure.

Transsion's two biggest markets are Africa, which accounted for 33% of revenue in the first half of this year, and emerging Asia Pacific markets, which made up 36%. But Africa revenue dropped 4.5% year-over-year in the first half, while emerging Asia Pacific revenue fell an even steeper 19.4%. The biggest collapse came in Central and Eastern Europe, where revenue plummeted by more than half, shrinking from 6.5% of total revenue to just 3.2%.

A closer look at the data reveals that plunging feature phone sales are driving these declines. The company's smartphone sales in Africa have actually held relatively steady, rising to 17.7 million units in the first half of 2025 from 17.2 million units a year earlier. But feature phone sales in the region cratered about 30% to 24.2 million units from 34.4 million a year earlier.

Searching for New Revenue Streams

Transsion is trying to offset its feature phone losses by expanding into mobile internet services and selling internet of things products like earbuds. But mobile internet services accounted for just 1.4% of revenue in the first half of this year. IoT product sales showed a bit more promise, with revenue from that segment rising 18% year-over-year in the first half to 2.57 billion yuan, representing 8.8% of total sales.

As revenue has come under pressure, the company's profit collapsed by more than half to 1.24 billion yuan in the first half of this year from 2.86 billion yuan a year ago. As Transsion's stock has fallen in response to its fading fortunes, the price-to-earnings ratio for its Shenzhen-listed shares has dropped to 21—below Xiaomi's 27 and well under Apple's 37.

Timing Is Everything, Or Is It?

If timing is everything, then Transsion's Hong Kong IPO application presents a mixed picture. From a business perspective, the company probably should have pursued this listing early last year when revenue was still growing and profits looked healthier. On the other hand, timing could work in its favor now, since Hong Kong is experiencing one of its hottest IPO markets in years and smartphone listings remain relatively rare.

But here's the question that potential investors need to consider: can Transsion quickly reverse its sagging fortunes? The company faces intensifying competition in smartphones, its feature phone business continues to erode, and its founder's expertise lies in a market segment that's rapidly disappearing. Against competitors like Xiaomi, Apple, and Samsung, Transsion will need to prove it can successfully navigate this transition to attract investor interest in what's shaping up to be a challenging listing.