Africa on cusp of first ever smartphone plant
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Johannesburg - A
Johannesburg startup is set to become the first company ever to manufacture
smartphones in Africa, taking advantage of low costs and growing local demand
to build handsets, tablets and other devices based on Google’s Android system.
Onyx Connect, a privately
backed company that’s raised R150 million ($10.8 million) from investors, will
begin production in the first quarter, according to Andre Van der Merwe, its
sales director. The company is licensed to load Google software like Android
and Chrome onto devices sold under its own brand or products it makes for
others.
“We are talking to
companies to manufacture handsets, laptops and possibly Android TV boxes,” Van
der Merwe said in an interview. Those talks include Google itself and
Johannesburg-based Vodacom Group, the South African unit of Vodafone Group, he
said.
Vodacom would “welcome the
opportunity” to offer high-quality devices made in South Africa, Jorge Mendes,
a Vodacom consumer sales and distribution executive, said in an e-mail,
declining to comment on Onyx specifically.
For Google, local
production would stoke a sales push in Africa, one of the few regions where it
isn’t the outright browser leader. The Alphabet Inc. unit trails Opera, which
accounted for 39 percent of web traffic in September on the continent, versus
32 percent for Google Chrome, according to StatCounter Global Stats. In
addition to software Google makes devices like Chromecast media players and
Chromebook Pixel laptops.
“With most Africans
accessing the internet for the first time on smartphones, it is important to
ensure affordable devices are available so that people can access the
benefits,” Google said in an e-mail.
Prohibitive
While a $600-plus iPhone
or Samsung Galaxy S7 is prohibitive to most African consumers, Onyx says it can
produce a device in Johannesburg for about $30 that includes a camera and 1
gigabyte of memory. The company is setting up a distribution centre in
Ethiopia within the next 12 to 18 months, Van der Merwe said. He said the
project will create 600 jobs.
A drop of about 40 percent
in the value of South Africa’s rand against the dollar in the past five years
has helped open the door. It’s made labour less expensive in Africa’s most
industrialised economy, while making phones imported from China or elsewhere in
Asia harder to afford. Manufacturer subsidies have largely fallen away,
limiting the availability of devices in the more-accessible price range of R600
($42) and below, according to Arthur Goldstuck, MD of researcher World Wide
Worx in Johannesburg.
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“The risk with such
investments is that the company is entering an industry where your marketing
budget will have to be massive and you are competing with companies that have
the biggest research and development spending in the world,” Goldstuck said.
“It can also be difficult to compete with economies of scale made possible by
vast volumes of devices assembled in massive factories in China.”
Onyx’s plan involves
tapping into China’s strengths. The company sourced circuit-board designs and
raw components from China, but it’s designing the rest of the phones and
building them itself from the circuit board up. The plastic cases are being
produced locally, and Onyx has its own research and development capability, Van
der Merwe said.
Some South African
companies, including Sekoko Mobile, Zest Mobile and Mint Mobile, are already
assembling smartphones from imported kits. By going a step further and actually
manufacturing the devices, Onyx is saving on import duties.
Along with the savings on
shipping and government incentives, “we are able to compete right here,” Van
der Merwe said.