LENOVO Corp. held the second position in the shipment of personal computers (PC) during the first quarter, according to the International Data Corp. (IDC). IDC said Lenovo posted a relative modest growth of 1.7 percent globally.
Ivan Cheung, Lenovo executive director and regional general manager of Central Asia Pacific, sat down with the BusinessMirror to discuss the business terrain for Lenovo.
According to IDC, the traditional PC market has recorded its first growth in five years. How does Lenovo view this?
Two things. One is we see that the mature market is “stock-dropping”, and we see that through television and the Internet.
In the past few years, we see in commercial market, the replacement cycle is very long. In the past, maybe three years or four years replacement cycle but in the past few years when we talk to customer, it will increase to five years, six years. We see in commercial market, especially in mature market, the demand is picking up.
That also causes overall PC market to stock-drop. So I think from my perspective, commercial/mature market is one key reason the market is stabilizing in traditional PC market, which is good news for us.
Smartphone market is mostly flat, especially in mature market. It is on the different side compared to traditional PC. Traditional PC, we see mature market is doing better. We see the replacement cycle is picking up before our smartphone market. Actually, we still see growth from emerging market, and it is more on entry level.
How does Lenovo assess the Central Asia-Pacific (CAP) market and its business?
For CAP, we have 13 countries. We do business in 13 different countries. We first set up CAP in October last year.
To me, the first priority is to make sure that we can align and communicate with all the countries and different business very well because we have 13 different countries, and we’re doing business in commercial PC, consumer PC, data center business, and also corporate. It involves a lot of different team and people.
What we focus on is to make sure that it cannot be the regional (people telling)countries to do something without hearing country feedback on whether or not it is something they want. Or horizontally, they need to make sure the sales and marketing team, services team, finance team—all team can work seamlessly together.
That’s why in the past few months, we changed quite a lot in our internal meetings—who should be inside—and to make sure the right amount of time is spent on alignment. It is also the reason why during the second half of last year (October to March) we see a very good momentum for CAP.
For example, the market is not growing right? But for us, actually, our revenue increased more than 5 percent year-on-year. So I think it is due to two reason.
One is the communication and alignment between region and country on different teams are better; second is we are much focusing on improving our premium mix that means increasing our unit price, or some more high-end products.
It also helps us increase our revenue, which is actually the most important thing the company needs to do. Because if revenue cannot grow just like human, it cannot grow then the company will have an issue. Alignment is a key success factor and we are doing well in terms of revenue growth year-on-year, in this growth-challenging market.
Lenovo landed on the number two spot in IDC’s list of top 5 vendors, based on worldwide traditional PC shipments. What do you think are factors that affected this slip?
Two factors. One is you may also know the PC component cost is going up, starting from November to December last year. It is very special because in the past 20 years in PC, everyone is just expecting the cost and price to drop. I think last November to December.
It may be the first time the component cost increased very fast in the past few months. And because of this, actually, Lenovo is taking a faster step to change some strategy in price. Because eventually, as a company, we need to protect our profit. Because we need to react to the increase in cost, we increase the price earlier than other competition.
Another thing, in the past several years, emerging market including (that in) China, the market would keep growing and the emerging market like in the US and Europe, the market is dropping.
And Lenovo is typically stronger in emerging markets in China before. Our company has higher market share in mature markets. So in the past, emerging market is where we are strong. Actually, our market share can be maintained at high level in No. 1. But when the market is changing, mature market grows faster that country makes change. It affect overall global position.
So these are the main reasons for the slip (from) No. 1: we needed to address the cost of impact earlier than our competitors and the change in mature and emerge market. This year, the company just finished its kick off—our fiscal year starts in April. And everyone in the company is very alive to change the direction from a product-centered company to a more customer-centric company.
We need to see that customer’s needs are addressed at every catch point starting from where they will see our product information, inquiry, go to the store to experience our products and most importantly, the after-sale services, which are all important in the buying journey of the customer.
We separate our business by consumer—small and medium businesses and large enterprise. Different customers have different needs.
We are very focused on hearing our customer feedback, considering all the catchpoint our customer can feel and experience without Lenovo products. And we all believe it’s the right direction. It should not be: “We have some product, we try to sell to you” but the direction would be “What do you want?”—end-to-end, including the product itself and services.
And we are looking to all the catchpoint to understand the customers‘ needs. We believe that making this change, this direction, eventually, we can continue to be successful in this PC market.
How’s Lenovo Philippines doing?
I think in January, we’re quite happy about our performance in the Philippines because on the one hand, component cost is increasing and the exchange rate is also not favorable to markets like the Philippines, as the the Philippine peso depreciated against the US dollar in the past few months.
We are much more focused on investing in customer service, which is very important, while we are trying to manage our profitability because of cost, exchange rate and improving our services.
From revenue and foundation perspective, we see the whole team is capable of significant change compared to what we did in the past. We do believe in continuing to please our customer.
How does Lenovo address the worries of multinational-technology companies about US President Donald J. Trump’s stand on migration and outsourcing?
The Philippine market still looks promising. For our overall company strategy, we mentioned that we are moving towards a customer-centricity strategy. Our company will continue to invest in three pillars.
One (pillar) is core PC business. The market size is still biggest—close to 200 billion—and we are leading in this industry. So PC is our bread and butter. We are very focused on this business and we are giving two years investment for our mobile-business group and data-center business. We already have some foundation on buying Motorola and IBM.
We are still building the team and expertise. And we expect in two or three years, these two business units will contribute significant revenue and profit for our company like PC. That’s why we keep investing in innovation, which is something we believe is very important. And that’s why we have $1.5 billion in investment, every year, putting in R&D (research and development).