China’s Lenovo plans to revive smartphone business with supply chain revamp, increased marketing push

PUBLISHED : Monday, 20 June, 2016, 8:11pm
UPDATED : Tuesday, 21 June, 2016, 11:12am

Chinese technology giant Lenovo Group expects to put its slumping smartphone business back on the growth path with a revamped manufacturing supply chain and a major global marketing push this year.

The two initiatives were disclosed by Lenovo chief operating officer Gianfranco Lanci and chief marketing officer David Roman in separate interviews with the South China Morning Post.

These efforts appear to have taken more urgency for Lenovo amid forecast slower global sales for the smartphone industry from this year.

Worldwide smartphone sales are predicted to grow 7 per cent to reach a total of 1.5 billion units this year, cooling from 14.4 per cent growth last year and a record-high 73 per cent increase in 2010, according to research firm Gartner.

Nomura analyst Huang Leping said in a report that Lenovo reached a peak scale of about US$12 billion in smartphone sales and 6.4 per cent global market share in the 12 months ended March 31 last year, aided by the company’s US$2.91 billion acquisition of Motorola Mobility from Google in October 2014.

But intense competition in mainland China and other large markets prompted Lenovo to restructure its mobile phone business in the third quarter last year, which included a US$300-million write-off of its smartphone inventory.

Lanci said Lenovo, the world’s largest supplier of personal computers, expected to “gain a big advantage” over the competition once the manufacturing supply chain of its smartphone business is fully revamped.

“The major strength of Lenovo [in the personal computer industry] is in its efficient supply chain,” Lanci said. “We’re working to leverage our personal-computer supply chain know-how for the smartphone business.”

He pointed out that Lenovo has fully integrated the supply chain for its personal computers and enterprise servers, which has helped shave the cost of components, allowed the assembly of these products in the same mainland factories and cut production cycle times.

“We need to complete [the revamp of Lenovo’s smartphone supply chain] within this year to gain the advantage in managing inventory and parts supplies, as well as provide flexibility in the factory,” Lanci said.

Without elaborating on the total cost involved, Roman said he expected Lenovo to increase its investments in advertising and marketing in the current fiscal year.

“What we’re trying to do is simplify our brand architecture, which means putting more marketing resources on the products which offer the most differentiation for Lenovo,” Roman said.

Nomura’s Huang said hopes for a recovery in Lenovo’s smartphone business would depend on demand for its recently launched Phab2 Pro, which is the world’s first smartphone with augmented reality technology, and new flagship the Moto Z.

“Lenovo would need US$11 billion revenue to reach a break-even point [for its smartphone business] in its current fiscal year,” Huang said.