Lenovo to move away from Chinese market
June 4, 2014 1 Comment
Lenovo to move away from Chinese market
Staff Reporter
2014-05-31
Wong Wai-Ming, CFO of Lenovo Group, said that the company plans to refocus its business on the international arena instead of China, reports the official website of the China’s nationalistic Global Times. China, Wong said, is no longer the most profitable market for Lenovo, according to the report.
China used to occupy up to 60%-70% of Lenovo’s revenue, yet this figure has sloped dramatically. China currently still creates 38% of Lenovo’s revenue, but the huge growth potential in Europe, the Middle East, Africa, and North and South America appear far more appealing, with estimated growth at about 30% in revenue. China, in comparison, has only 1.3% growth of revenue. Statistics suggest that despite the huge profit in China, it has already declined 10% compared with the same time last year, reported Moneycontrol, an Indian financial news website on May 26.
Though Lenovo has surpassed Hewlett-Packard Development Company (HP) as the largest detailer of personal computers (PC), Lenovo’s strategic focus has turned from the shrinking PC market to tablet PCs and smartphones. The company aims to see sales of 1 billion units in 2015 as the third largest smartphone seller, Wang said.
Samsung is the second largest smartphone manufacture in China, however the market in China has already matured. “We still have a long way to go to be top in smartphone sales in China. The difficulty does not lies in profitability, but the quantity of profit,” said Wang.
Compared with the fourth quarter of 2013, the freight volume for smartphones in the first quarter of 2014 declined 2%. This resulted from fierce competition in the market, especially with many new companies pouring in during previous quarters, said Yang Yuanqing, CEO of Lenovo. Yang once said that China is “the fiercest smartphone market in the world.”
The expansion of the smartphone market beyond China will lead to inevitable encounters with Samsung and Apple. With a huge market, Lenovo can find a place in mainstream products as well as new markets, garnering growth of 20%-30%.
On January 29 Lenovo acquired Motorola from Google with US$29.1 billion. That was not Lenovo’s first acquisition. It acquired IBM PC in December 2014 with US$ 1.25 billion, and on January 23, 2014 Lenovo acquired IBM’s Intel based server lines for US$23 billion. The acquisition of Motorola will help Lenovo’s international ambitions given Motorola’s close connection with operators and distributors.
At the end of 2013, the annual sales of Lenovo smartphones rose 29%, totaling 50 million units, about the same number of units as its PCs. The sale units for tablet PCs were 9.2 million.
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