China’s PC maker Lenovo feels demand pinch
The company aims to release its first ‘AI PC’ to reinvigorate sales, but it'll only be ready in the second half of 2024
Hong Kong — China’s Lenovo Group on Thursday posted a 16% fall in revenue for the three months through September, meeting market expectations, as supply for personal computers (PCs) continued to outstrip demand.
Lenovo’s quarterly revenue fell 16% to $14.41bn from the same period last year, marking the fifth consecutive quarter that the world’s largest PC maker has suffered a sales decline as it continues to digest excess inventory accumulated during the pandemic.
The result compared with the $14.45bn average of seven analyst estimates compiled by LSEG.
In May, Lenovo reported 14% revenue decline for the year through March, its first annual fall since 2019, after a pandemic-induced boom for electronics manufacturers.
The Covid-19 outbreak brought a surge in both enterprise and personal electronics sales as the world embraced remote work. However, revenue started contracting last year as supply began to outstrip demand.
Worldwide PC shipments fell 7% in the second quarter of 2023, data from researcher Canalys shows. The quarterly shipment decline surpassed 30% late last year, but the pace has slowed in recent quarters.
To help lift PC sales, Lenovo aims to release its first “AI PC” — or PC that can make use of artificial intelligence (AI) without the internet — in the second half of next year, said chair Yang Yuanqing.
“We definitely believe that this new category of PC will bring value to our users and customers and boost another round of sales in PCs,” Yang said in an interview.
A key selling point of AI PCs is that users will not need to send data to the cloud to use generative AI tools, better protecting user privacy.
Yang said Lenovo is still evaluating any impact of new US curbs on AI chip exports, which barred US chipmaker Nvidia from selling many AI chips to China.
“The new US regulations only restrict the high-end GPUs, (graphics processing units) particularly for AI training. But it’s not all the chips,” he said. “We have a very broad and comprehensive co-operation with Nvidia in gaming PCs, in workstations and in high-performance computing. I think, definitely, this business will not be impacted.”
Beyond PCs
To improve profit margins, Lenovo has also been expanding non-PC businesses, such as smartphones, servers and information technology (IT) services.
Throughout the first half of its fiscal year, revenue from Lenovo’s digital solution service business rose 14% to $3.6bn. But overall net income attributable to shareholders in the second quarter fell 60% to $249m versus analysts’ $235m estimate.
The price of Lenovo shares fell 2.86% in early afternoon trading in Hong Kong after the earnings release, compared with a 1.42% decline in the benchmark index.
Reuters