Lenovo steps up output to cash in on PC Plus era

As part of its protect-and-attack strategy, the mainland giant is growing production to meet demand for PCs, smartphones and tablets

PUBLISHED : Wednesday, 29 May, 2013, 12:00am
UPDATED : Wednesday, 29 May, 2013, 5:12am

Computer giant Lenovo Group is betting on greater in-house manufacturing capabilities to help its global expansion into smartphones, media tablets, servers and storage systems.

Chairman and chief executive Yang Yuanqing said this approach would provide Lenovo, the world's second-biggest personal computer supplier, with "a unique competitive advantage in the PC Plus era".

Over the past several months, the group has started ramping up production at its new facilities in China, Brazil and the United States. Its production facilities include those in Beijing, Shanghai, Shenzhen and Mexico.

"Looking ahead, it is clear that our industry has changed," Yang said. "Lenovo has built a foundation to help continue its strong momentum."

Lenovo has summed up that change as the "PC Plus era", in which the computing hardware requirements of consumers have grown to include personal computers, smartphones and tablets.

For its corporate clients, servers and storage systems are the products that Lenovo will add to the mix.

Alberto Moel, a senior analyst at Bernstein Research, described in a report that Lenovo's efforts to grow its in-house manufacturing infrastructure complemented its long-standing "protect-and-attack" strategy.

The strategy has Lenovo "protect" its strong business in China and enterprise sales in developed economies, while "attacking" emerging markets such as India, Brazil, eastern Europe and southeast Asia.

Lenovo, which operates in more than 160 countries, must also "protect" the profitability of its core personal computer business and "attack" the smartphone, tablet, server and storage system markets.

The computer maker last week reported a record net income of US$635 million and a new high of US$34 billion in revenue for the financial year to March, despite negative growth for the global personal computer industry.

Moel said "increasing the in-house production capability and continuing to strengthen vertical integration would help" Lenovo improve its efficiency and speed up the release of products on the market.

Lenovo outsources about 50 per cent of its products, covering certain notebooks and smartphone models.

The US$300 million joint venture with Taiwanese company Compal Electronics has built and started production at a new plant for laptops and "all-in-one" desktop computers in Hefei, Anhui province.

Lenovo, which has its headquarters in Beijing and in North Carolina in the US, is also investing up to five billion yuan (HK$6.3 billion) to build a manufacturing complex for smartphones, media tablets and other mobile internet devices in Wuhan, Hubei province.

The company's manufacturing in Brazil has grown significantly after its HK$1.11 billion acquisition of computer and consumer electronics firm Comercio de Componentes Electronicos. In North Carolina, Lenovo has started manufacturing its Think brand notebooks, desktops and media tablets.