Source:
https://scmp.com/tech/enterprises/article/2187095/lenovo-chief-expects-quick-resolution-sino-us-trade-war-sees-only
Tech/ Enterprises

Lenovo chief expects quick resolution to Sino-US trade war, sees only minor impact on its global operations

  • US$14 billion revenue gain during the latest quarter was also Lenovo’s highest quarterly revenue for four years

The head of China’s Lenovo Group is optimistic there will be a fast resolution to the ongoing trade war between the world’s largest two economies, though Yang Yuanqing says his company is not suffering much thanks to its large global presence.

“We have heard a lot of positive messages or signals about achieving an agreement [between the US and China on trade] so definitely I think there will be good news not just for Lenovo but for most multinational companies,” the chairman and chief executive of Lenovo said on a quarterly earnings webcast on Thursday, when the world’s largest personal computer (PC) maker by shipments reported better-than-expected profit gains for the three-months ended December.

Quarterly profits reached US$233 million after the Chinese company saw strong growth across its major business segments, compared with a US$289 million loss in the same period a year earlier when the company recorded a one-time write-off of US$400 million in deferred income tax assets due to tax reform passed in the US at the end of 2017.

The US$14 billion revenue gain during the latest quarter was also Lenovo’s highest quarterly revenue for four years, up 8.5 per cent year on year, after PC and smart devices’ business revenue was up 11.6 per cent to a record high of US$10.7 billion, while its mobile segment became profitable worldwide for the first time since the Motorola Mobility acquisition in 2014.

The US and China have started to outline commitments in principle on the stickiest issues in their trade dispute, marking the most significant progress yet toward ending the seven-month trade war, Reuters reported on Thursday, citing people familiar with the negotiations.

Although the two countries remain far apart on demands made by the Trump administration for structural changes to China’s economy, Reuters said the broad outline of what could make up a deal is beginning to emerge as the two sides push for an agreement by March 1, when US imposed tariffs are scheduled to rise to 25 per cent from 10 per cent on US$200 billion in Chinese goods.

Despite Lenovo’s notable business presence in both the US and Chinese market, Yang said the results suggest that the company is less impacted by the trade war or geopolitical issues thanks to its “globalisation” strategy, whereby the company has become a global player in sales and marketing as well as in manufacturing and research and development (R&D) over the past 15 years.

“I believe Lenovo is the most balanced global company in the world, no matter [whether] from the business distribution or diversification point of view. We are an international and global company, though we are rooted in China as well,” Yang said.

Lenovo shipped the most PC units of any vendor in the fourth quarter of 2018, giving it a market share of more than 24 per cent, according to research agencies IDC and Gartner, which both estimated that the overall PC market will continue to decline, warning that the trade war could make things worse.

Chinese technology companies caught up in the trade friction are also facing a tougher business environment, especially in western markets where some have been criticised as potential national security risks.

After Huawei Technologies, the world’s largest telecom equipment vendor, was blocked from markets like the US, there was speculation that Lenovo may be the next “Red Menace” in the war against perceived Chinese espionage. Some large American companies were leery of deploying Lenovo servers and any firm seeking to win US government contracts would be wise to heed the political winds, Bloomberg columnist Tim Culpan wrote on January 7.

When asked to comment on the column, Wong Wai Ming, Lenovo’s executive vice-president and chief financial officer, said that as an international company Lenovo has strictly complied with local laws and regulations and is a trusted partner of all cooperative enterprises.

“The numbers in our performance results tell everything,” Wong said in a telephone interview after the earnings webcast.