Lenovo locks horns with Apple, Samsung
Beijing giant to put R&D muscle into battle for home mobility market
Beijing-based Lenovo Group is readying itself for battle against Apple Inc. and Samsung Electronics in China's mobility market, as it ponders a foray into the arenas of tablets and smartphones, reports Bloomberg.
Lenovo is poised to overtake Hewlett-Packard as this year's biggest PC vendor, but is anxious to mitigate its dependence upon more traditional products in favour of the rapidly expanding mobile market.
"We want to test the market, see the first steps toward success in China, then roll out to the rest of world," chief executive officer Yang Yuanqing said. "We want to win in the smartphone area and even the TV area."
Lenovo, which introduced its first touch-screen handset in 2010, is spending $793m on an R&D and production facility dedicated to mobile devices, it said in May. The factory will open in October 2013 and will have sales of $1.6bn by 2014, quintipling to $8bn in five years, the company estimates.
"Our development cycle will be much faster than our competitors," said Yang. "Not only are we an innovative company, we understand emerging markets. We have a different strategy."
A China-first strategy gives Lenovo "the right balance between near-term profitability and long-term growth," said Masha Gordon, head of emerging-market equity portfolio management at Pacific Investment Management.
"Lenovo is likely to leverage its global PC footprint to expand its global presence in these new areas."
Yang believes the brand strength of Lenovo in China coupled with its product development and distribution capabilities will give the company a significant leg up on Apple and others that sell their products elsewhere before shipping to China, which is about to become the world's largest smartphone market.
According to IDC figures, Lenovo's China shipment volumes for smartphones topped those of its PC business for the first time in the second quarter of this year. In its home market the company already outsells the iPhone.
Jean-Louis Lafayeedney, an analyst with JI Asia in Hong Kong thinks Lenovo will struggle to crack markets where consumers are used to devices that are distinguished by look and feel.
"I don't see Lenovo being able to do it, not in the foreseeable future," said Lafayeedney, who rates the shares as "sell". He said the company lacks the software development power to lure users away from Apple's operating system and Samsung, which sells devices based on Google's Android.
Samsung was the market leader of China's smartphone market in Q2, with a 19% share. Like Lenovo, the South Korean company releases phones through China's three main providers, whereas Apple's iPhones are not available to China Mobile's 693m subscribers, a customer base greater than the combined populations of the US, Japan and Brazil.
China will overtake the US as the world's largest smartphone market this year, with shipments climbing 52% to 137m, according to IDC.