Lenovo to double sales by focusing on mid-range

PUBLISHED : Monday, 26 March, 2012, 12:00am
UPDATED : Monday, 26 March, 2012, 12:00am
 

Despite tough competition on the mainland, computer giant Lenovo is expected to more than double domestic sales of its smartphones in the next 12 months as it focuses on mid-priced handsets.


Lenovo, the world's second-largest supplier of personal computers, is forecast to sell about 13 million smartphones in the year to next March, up from an estimated 6.2 million this year, according to a recent report by Bernstein Research.


'Lenovo is betting big on mid-range smartphones in the US$100 to US$200 average selling price range, a segment we expect will see explosive growth,' Bernstein Research senior analyst Alberto Moel said.


Hong Kong-listed Lenovo established its mobile internet and digital home business unit in January last year to compete in smartphones, media tablets, and internet-linked 'smart' televisions.


The unit contributed about US$570 million of the firm's total US$8.4 billion revenue in the quarter to December.


Yang Yuanqing, the chief executive of Lenovo, said last month that he believed the mobile internet business would become a growth engine for the group.


However, the challenge for Lenovo is that leading mainland original equipment manufacturers are also targeting the nation's growing 3G subscriber base and 'piling their efforts into that [same mid-range] price point', Moel said.


That group of competitors includes Huawei Technologies, ZTE, Coolpad-maker Yulong Computer Telecommunication Scientific (Shenzhen), Shanghai-based SIM Technology, Beijing Tianyu Communication, TCL Communication, and new entrant Xiaomi Technology.


'We estimate that the segment will grow from about 18 million units last year to 70 million units in 2016, accounting for most of the smartphone growth in China,' Moel said.


'We forecast the total revenue in this segment will rise from about US$3 billion last year to over US$10 billion in 2016.'


According to data from Strategy Analytics and Bernstein Research, 84 million smartphones were sold on the mainland last year. Most handsets were priced between 1,200 yuan (HK$1,470) and 1,900 yuan, with those in the premium range priced above 1,900 yuan. Prices of Apple's popular iPhone 4S, for example, start at 4,988 yuan.


Nokia, Samsung Electronics, and Apple remained the mainland's top-three smartphone brands last year, with a combined market share of about 60 per cent. These were followed by ZTE and Huawei, which combined for a 15 per cent market share.


Lenovo, which ranked 10th among the smartphone brands last year, sold most of its handsets through China Unicom. In the quarter to December, Lenovo sold 3 million smartphones and 3.5 million 2G phones.


Moel said the strong brand in the computer industry gave it the upper hand against new handset entrants with no prior track record, but he pointed out that the company needed wider distribution to gain a firm mainland foothold.


Adding China Mobile - which had 661 million subscribers as of February 29, including 56.6 million 3G users - as a carrier-partner would help Lenovo achieve the scale it needed 'to offer lower price points and amortise research and development costs over a broader revenue base', Moel said.

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