Urbanisation on mainland China to spur PC market growth, Lenovo says

Economic strategy will provide growth opportunities when vast markets are opened up, PC maker's chief says

PUBLISHED : Wednesday, 17 July, 2013, 12:00am
UPDATED : Wednesday, 17 July, 2013, 5:59am

Unfazed by the economic slowdown on the mainland, Lenovo is betting on Beijing's aggressive initiatives in urban expansion to provide long-term growth opportunities for personal computers and smart devices.

Lenovo has been keeping an upbeat outlook following its success in unseating Hewlett-Packard as the world's largest personal computer supplier in the second quarter.

I believe urbanisation will help us further increase the overall PC market
Yang Yuanqing, Lenovo Chief

Describing Lenovo's prospects on the mainland at its annual general meeting in Hong Kong yesterday, chairman and chief executive Yang Yuanqing said: "I believe urbanisation will help us further increase the overall [domestic] PC market."

Yang admitted that the slowdown on the mainland has affected the company's personal computer business.

But he also emphasised the opportunity presented by the mainland's lower penetration rate of personal computers compared with developed countries.

Urbanisation, the centrepiece of Premier Li Keqiang's economic policies, is expected to allow Lenovo and other personal computer suppliers to reach a vast, largely untapped market on the mainland.

A recent report by Bernstein Research predicted that the vast rural markets would provide steady and higher growth opportunities for Lenovo over the next five years, compared with the mainland's major urban markets.

Yang said Lenovo had previously benefited from the central government's rural subsidy programme, part of a wider economic stimulus initiative, which helped boost purchases of consumer electronics, computers and home appliances in the countryside.

The programme, which Lenovo joined in 2004, concluded in 2011.

Alberto Moel, a senior analyst at Bernstein, said Lenovo's growth strategy on the mainland "lies in a thoughtful segmentation of local markets". Lenovo's management, Moel said, had forecast up to 5 per cent growth over the next three to five years in the mainland's mature markets composed of large cities, 15 per cent in its emerging markets and 25 per cent or more in the townships and villages, where the company has enjoyed consistent price premiums and a stronger local presence than its traditional competitors.

Yang, however, said Lenovo had no interest to participate in a price war with other personal computer brands on the mainland, where it has been the market leader since 1997.

Lenovo, which has two headquarters, in Beijing and in North Carolina in the United States, has differentiated itself from the competition by being more aggressive in the larger "PC Plus" opportunity, which includes smartphones and media tablets.

Technology research company IDC ranked Lenovo as the No 2 smartphone brand on the mainland in the first quarter, behind market leader Samsung Electronics. In the same quarter, Lenovo was the No 3 tablet supplier, behind Apple and Samsung.

Yang reiterated the company's previous forecasts of shipping 50 million smartphones and 10 million tablets this year.

Lenovo's share price advanced 0.56 per cent yesterday to finish at HK$7.22, its highest close since reaching HK$7.29 on June 17.