Lenovo's mobile phone business is unlikely to replicate the PC myth after missing out on a good development opportunity

According to the latest data from IDC, Lenovo's global smartphone market share in the third quarter was 5.3%. Although it has increased slightly compared with last year, this performance is not ideal for Lenovo, which has acquired Motorola for a year. Industry experts believe that although Lenovo has achieved the myth of dominating the global PC market through the acquisition of IBM, it has missed the best opportunity in the smartphone industry. The market competition environment has continued to deteriorate, making it difficult for Lenovo's mobile phones to replicate the PC myth.

Smartphone market share is not improving

It has been exactly one year since Lenovo announced the completion of the acquisition on October 30, 2014. However, the integration of Lenovo's mobile phone business has hardly been smooth over the past year.

Lenovo Group's financial report shows that in the first fiscal quarter ending June 30, 2015, revenue increased slightly by 3% year-on-year to US$10.7 billion, but net profit fell 51% year-on-year to US$105 million, and the mobile business group's total pre-tax loss was US$292 million.

In terms of smartphone sales, Motorola contributed 5.9 million units to Lenovo's total smartphone sales in the first quarter, but sales fell 31% year-on-year. In addition, Lenovo sold a total of 16.2 million smartphones in the first quarter, but its global smartphone market share fell 0.5 percentage points year-on-year to 4.7%.

According to the latest data from market research firm IDC, Lenovo still failed to rank among the top three in terms of global smartphone shipments in the third quarter of 2015, and the gap with third-place Huawei has further widened. Lenovo's sales in the third quarter were 18.8 million units, accounting for about 5.3% of the global market share, while Huawei's shipments increased by 60.9% year-on-year to 26.5 million units, accounting for about 7.5% of the global market share.

Talking about the loss of the mobile business, Lenovo Group Chairman and CEO Yang Yuanqing pointed out that it was mainly due to the transition from feature phones to smartphones and the many unnecessary expenses in the acquisition of Motorola. "The loss is not because of bad products. On the one hand, it is because the production capacity is in the process of re-climbing during the transition from feature phones to smartphones, and the cost structure needs to be adjusted. In addition, the gross profit margin of Motorola products is 25%, but the expense rate is higher than the gross profit margin, which leads to losses." Yang Yuanqing also said that this is also a very important reason for Lenovo to carry out large-scale restructuring and adjustments to Motorola.

The biggest problem stems from internal chaos

As early as June this year, Lenovo began to integrate its management team. On June 1, Liu Jun, who previously served as Lenovo's executive vice president, president of the mobile business group and chairman of Motorola's management committee, suddenly resigned and was replaced by Chen Xudong. On July 1, Motorola's vice president and global sales director Zhao Kelin resigned. Lenovo tried to get out of the predicament as soon as possible through personnel adjustments. But for Lenovo, the road ahead is difficult and the difficulties have just begun.

Xu Shangfeng, a communications industry observer, believes that Lenovo's biggest problem lies in the internal chaos of Lenovo's mobile phones. So far, Lenovo has not had a product that people can remember. There are too many internal brands and too many product models, which leads to distraction and inability to form brand synergy. In the high-end market, Lenovo once launched the high-end brand VIBE Z, priced at 3,399 yuan. However, consumers did not buy it. Some peers said that Lenovo had previously launched too many cheap mobile phones with questionable quality, which lowered its brand image and made it very difficult for it to move into the high-end market.

Guo Tongyan, head of Lenovo's brand department, said in an interview with Beijing Business Daily that Lenovo and Motorola teams have been fully integrated, with Motorola's team taking the lead in product development, while Lenovo's original team will take the lead in marketing, market and supply chain, in order to give full play to their respective advantages. In terms of product positioning, the dual-brand strategy will be maintained in the future, with Motorola positioned in the mid-to-high-end market, while Lenovo will be positioned in the mid-to-low-end market, mainly through operator channels.

Yang Yuanqing also said in an interview with the media that Lenovo Group will be successful if 1-2 of the above four brands succeed. But Xu Shangfeng believes that Yang Yuanqing is too optimistic. Lenovo has suffered a cliff-like decline and it is impossible to achieve great success today when operators cut subsidies. VIBE is becoming more and more low-end and it is difficult to make its own voice. Motorola is aging rapidly due to slow integration.

Lenovo Mobile Phones Has Missed the Opportunity to Develop

In fact, before acquiring Motorola, Lenovo had the idea of ​​replicating the PC and becoming the world leader. Yang Yuanqing pointed out that Lenovo had high expectations in these aspects. "Otherwise, we would not have spent such a huge price. This price is not just money, but experience and the determination to go through difficulties." Yang Yuanqing said.

Although Lenovo has good ideas and certain advantages and accumulation, it is not easy to achieve the same success as PC. Liu Qicheng, a senior expert in the communications industry, analyzed, "From the personnel adjustments in Lenovo's global channels, it can be seen that Lenovo is working hard, but I am not optimistic about the specific results. The reason is that although Lenovo has replaced many senior executives in the past period of time, many of the successors are also trained by the traditional Lenovo system, and their thinking is also influenced by Lenovo's old thinking."

On the other hand, it is a question of timing. In the view of Li Yi, Secretary General of China Mobile Internet Industry Alliance, the timing of smartphone development is very important. Many companies cannot achieve results just by having the ability. The key is to hit the right time node. For example, Xiaomi achieved rapid growth four years ago, but if Xiaomi were put in today, I am afraid it would not have much chance. For Lenovo, now it not only has to face competition from many strong rivals such as Samsung, Apple, and Huawei, but also has to take into account the industry factors of the slowdown in the global smartphone market. Chen Xudong admitted that the bad market is a big challenge for Lenovo mobile phones.

Industry observers also pointed out that unlike Apple and Samsung, Huawei, as a latecomer, may put more pressure on Lenovo. Huawei's strength lies not only in the domestic market, but more importantly in the continuous expansion of the international market, which may pose a greater obstacle to Lenovo's international development.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.