lenovo's smartphone market share jumped in its latest quarter as it sold more handsets in emerging markets. The Wall Street Journal's Yun-Hee Kim speaks to IDC Analyst Bryan Ma about whether it can take on Apple and Samsung.
HONG KONG— Lenovo Group Ltd. 0992.HK +0.85% is on a fast track to become a significant competitor in smartphones—not just in China but also overseas, taking onSamsung Electronics Co. 005930.SE +0.52% and Apple Inc. AAPL -0.87%
Already the world's largest personal-computer maker by shipments, the Chinese company has made significant progress in smartphones. In the second quarter, Lenovo not only became the No. 1 smartphone maker in China, overtaking Samsung, but was the No. 4 vendor by shipments world-wide, according to research firm IDC. Analysts predict Lenovo could become an even bigger player after it completes its acquisition of Google Inc. GOOGL +1.22% 's Motorola Mobility handset unit, which the Chinese company agreed to buy for $2.91 billion earlier this year.
"Although China is still the most important market for our smartphone business, we think we have even more opportunities outside China," Chief Executive Yang Yuanqing said in an interview.
Thanks to strong smartphone sales in Southeast Asia, Eastern Europe and Latin America, Lenovo said Thursday that its net profit rose 23% to $214 million for the quarter through June from $174 million a year earlier, beating analysts' expectations.
Revenue increased 18% to $10.4 billion.
A woman holds a Lenovo Vibe Z smartphone for a photograph at a store in Hong Kong on May 23.Bloomberg News
Lenovo said its smartphone shipments in the quarter jumped nearly fourfold in Southeast Asia and sixfold in Eastern Europe, without disclosing figures.
WSJD is the Journal's home for tech news, analysis and product reviews.
"Those are our future potential markets, so we definitely put more effort and more resources into those markets," Mr. Yang said.
But Lenovo's success in the global market also hinges on how much it can benefit from Motorola. Mr. Yang said Motorola's strength in North America and Latin America, as well as its intellectual property and close ties with mobile carriers world-wide, will help Lenovo become a more-competitive player abroad. In the U.S., Lenovo plans to concentrate on Motorola-branded smartphones, rather than introducing phones with the Lenovo logo.
Motorola is unprofitable under Google, but it is recovering faster than expected, and Lenovo continues to predict it can make the business profitable in four to six quarters after it closes the deal, Mr. Yang said.
Chinese players such as Lenovo and Huawei Technologies Co. are stepping up their overseas expansion, posing a threat to Samsung as they sell affordable Android handsets with competitive technological features to millions of consumers replacing their basic cellphones with smartphones. As the market for high-end smartphones becomes saturated, the industry's growth is being fueled by demand for inexpensive models in emerging markets, such as Southeast Asia, India, Brazil and Russia.
Lenovo, for example, now holds 8% of the Malaysian market and 7% of Vietnam's, after having little presence in those two countries a year ago, according to Counterpoint Research.
"They seem to have found a sweet spot," said Counterpoint analyst Tom Kang. Like most Chinese handset makers, Lenovo sells smartphones that are much less expensive than the iPhone or Samsung's flagship Galaxy phones. Among Chinese companies, Lenovo is the most familiar brand in Southeast Asia thanks to its PC business, Mr. Kang said.
While many smartphone makers outsource their production, Lenovo manufactures its own handsets at its huge industrial complex in the central Chinese city of Wuhan. In-house manufacturing has given the company flexibility in making changes to its product lineup.
Lenovo CEO Yang Yuanqing sees room for growth outside China. Parker Eshelman/The Wall Street Journal
Still, Lenovo's success in the global market isn't guaranteed. Challenges from other Chinese rivals that offer even less-expensive phones could put more pressure on its profit margins, not just in China but overseas, Sanford C. Bernstein analyst Alberto Moel said.
Mr. Yang said Lenovo's smartphone business in China is profitable but earns only "a little bit of money." Profitability from smartphones in emerging markets is higher than in China, he said.
Huawei, the world's third-largest smartphone maker ahead of Lenovo, said last month that its smartphone shipments in the Middle East and Africa in the first half of this year jumped more than sixfold from a year earlier, while its Latin America shipments rose nearly fourfold. Upstart Xiaomi Inc., meanwhile, is also trying to sell more smartphones abroad.
PCs still account for nearly 80% of Lenovo's revenue, but the mobile-devices business, which represents 15%, is growing quickly. In the second quarter, Lenovo's global smartphone market share was 5.4%, trailing Samsung with 25.2%, Apple with 11.9% and Huawei with 6.9%, according to IDC. In China, Lenovo became the biggest smartphone vendor by grabbing 12.5% of the market, while rival Samsung, with 9.8%, struggled with high inventories of unsold phones.
HONG KONG— Lenovo Group Ltd. 0992.HK +0.85% is on a fast track to become a significant competitor in smartphones—not just in China but also overseas, taking onSamsung Electronics Co. 005930.SE +0.52% and Apple Inc. AAPL -0.87%
Already the world's largest personal-computer maker by shipments, the Chinese company has made significant progress in smartphones. In the second quarter, Lenovo not only became the No. 1 smartphone maker in China, overtaking Samsung, but was the No. 4 vendor by shipments world-wide, according to research firm IDC. Analysts predict Lenovo could become an even bigger player after it completes its acquisition of Google Inc. GOOGL +1.22% 's Motorola Mobility handset unit, which the Chinese company agreed to buy for $2.91 billion earlier this year.
"Although China is still the most important market for our smartphone business, we think we have even more opportunities outside China," Chief Executive Yang Yuanqing said in an interview.
Thanks to strong smartphone sales in Southeast Asia, Eastern Europe and Latin America, Lenovo said Thursday that its net profit rose 23% to $214 million for the quarter through June from $174 million a year earlier, beating analysts' expectations.
Revenue increased 18% to $10.4 billion.
A woman holds a Lenovo Vibe Z smartphone for a photograph at a store in Hong Kong on May 23.Bloomberg News
Lenovo said its smartphone shipments in the quarter jumped nearly fourfold in Southeast Asia and sixfold in Eastern Europe, without disclosing figures.
WSJD is the Journal's home for tech news, analysis and product reviews.
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"Those are our future potential markets, so we definitely put more effort and more resources into those markets," Mr. Yang said.
But Lenovo's success in the global market also hinges on how much it can benefit from Motorola. Mr. Yang said Motorola's strength in North America and Latin America, as well as its intellectual property and close ties with mobile carriers world-wide, will help Lenovo become a more-competitive player abroad. In the U.S., Lenovo plans to concentrate on Motorola-branded smartphones, rather than introducing phones with the Lenovo logo.
Motorola is unprofitable under Google, but it is recovering faster than expected, and Lenovo continues to predict it can make the business profitable in four to six quarters after it closes the deal, Mr. Yang said.
Chinese players such as Lenovo and Huawei Technologies Co. are stepping up their overseas expansion, posing a threat to Samsung as they sell affordable Android handsets with competitive technological features to millions of consumers replacing their basic cellphones with smartphones. As the market for high-end smartphones becomes saturated, the industry's growth is being fueled by demand for inexpensive models in emerging markets, such as Southeast Asia, India, Brazil and Russia.
Lenovo, for example, now holds 8% of the Malaysian market and 7% of Vietnam's, after having little presence in those two countries a year ago, according to Counterpoint Research.
"They seem to have found a sweet spot," said Counterpoint analyst Tom Kang. Like most Chinese handset makers, Lenovo sells smartphones that are much less expensive than the iPhone or Samsung's flagship Galaxy phones. Among Chinese companies, Lenovo is the most familiar brand in Southeast Asia thanks to its PC business, Mr. Kang said.
While many smartphone makers outsource their production, Lenovo manufactures its own handsets at its huge industrial complex in the central Chinese city of Wuhan. In-house manufacturing has given the company flexibility in making changes to its product lineup.
Lenovo CEO Yang Yuanqing sees room for growth outside China. Parker Eshelman/The Wall Street Journal
Still, Lenovo's success in the global market isn't guaranteed. Challenges from other Chinese rivals that offer even less-expensive phones could put more pressure on its profit margins, not just in China but overseas, Sanford C. Bernstein analyst Alberto Moel said.
Mr. Yang said Lenovo's smartphone business in China is profitable but earns only "a little bit of money." Profitability from smartphones in emerging markets is higher than in China, he said.
Huawei, the world's third-largest smartphone maker ahead of Lenovo, said last month that its smartphone shipments in the Middle East and Africa in the first half of this year jumped more than sixfold from a year earlier, while its Latin America shipments rose nearly fourfold. Upstart Xiaomi Inc., meanwhile, is also trying to sell more smartphones abroad.
PCs still account for nearly 80% of Lenovo's revenue, but the mobile-devices business, which represents 15%, is growing quickly. In the second quarter, Lenovo's global smartphone market share was 5.4%, trailing Samsung with 25.2%, Apple with 11.9% and Huawei with 6.9%, according to IDC. In China, Lenovo became the biggest smartphone vendor by grabbing 12.5% of the market, while rival Samsung, with 9.8%, struggled with high inventories of unsold phones.