Exclusive: Chinese company's chief executive says US reports are baseless after firm posts a revenue of $13.4bn, up 14 per cent year-on-year in the second quarter
Lenovo CEO reiterates strict security is paramount amid spyware claims
Lenovo, the world's largest manufacturer of personal computers (PCs), has spruced up its security framework following reports related to US allegations of the Chinese government’s attempts to spy through microchips installed in devices used in data centres.
“That issue was related to Super Micro, which has never been Lenovo’s supplier … security is our priority and we have always paid utmost attention to it,” Yang Yuanqing, chairman and chief executive of Lenovo, told The National.
Super Micro is a California-based motherboard and storage manufacturer that assembled the machines used in data centres operated by Amazon and Apple. Both Apple and Amazon have denied an October report that listening devices were deployed into their data centres.
“Lenovo is a trusted supplier not just in China but in entire Europe and North America and that reportage [of alleged spy systems] has not impacted our business,” said Mr Yuanqing, adding, “However, we have taken further steps to review our entire process of product development to make sure our product is safe. We have built a global image of a trustworthy partner and it is intact.”
Lenovo, also Chinese, posted revenue of $13.4 billion in the second quarter ending September 30, up 14 per cent year-on-year. For the third consecutive quarter, Lenovo achieved double-digit year-on-year revenue growth and this quarter's revenue was the highest quarterly result in nearly four years.
Regarding the ongoing trade friction between the US and China, Mr Yuanqing said no one will come out a winner.
“Globalisation has benefited all people globally. Manufacturing cost was low in China, so goods were sold cheap in the US and worldwide. In the beginning, there could be some conflicts because we [US and China] don’t understand each other, we don’t know each other.
“But we should learn what’s the difference and then try to adapt to the difference … compromise with the difference. We respect each other, that’s why we saw a very successful integration during IBM deal.”
Lenovo had successfully taken over New York-based IBM’s PC business for nearly $1.75bn in 2005. Currently, Lenovo has the largest global market share in the PC industry at 23.7 per cent, according to the International Data Corporation, a researcher headquartered in Massachusetts. It is followed by HP and Dell at 22.8 and 17 per cent market share, respectively.
Lenovo, which is mainly a device company, is now shifting its focus on to the service industry.
“Services business is Lenovo’s future. That’s why in the last quarter, for the first time, we reported our service revenue reaching close to $700 million. Although it accounted for only 5 to 6 per cent of our total business, I think it’s a good start,” said Mr Yuanqing.
In the third quarter, Lenovo’s PCs and smart devices business surpassed $10bn revenue mark for the first time – up 18 per cent year-on-year. The company has invested nearly $1.5bn on research and development (R&D) in the past fiscal year.
“Percentage-wise [of total revenues], R&D investment is not very high but it is a traditional PC industry norm. However, with our new businesses like data centres coming up, we will increase our R&D investment share,” said Mr Yuanqing.
“In the past couple of years, we have invested more on AI [artificial intelligence] and smart technologies. Our future focus areas include smart IoT [Internet of Things], smart infrastructure and smart manufacturing.”
Instead of expanding in all markets, Lenovo is focusing on capitalising on its best performing ones in Latin America, North America, western Europe, India and China.
“Two years ago, we tried building higher scales and expanding into more markets but that strategy failed. We learned from that experience - if we have to focus on profitability then we should know what to take up and what to give up.
“Therefore our focus is on selective markets that have shown good growth in last few quarters. But this is the first step and if we manage to maintain the momentum in next quarters then we will adopt an aggressive expansion approach in other markets as a second step,” Mr Yuanqing said.
Refuting the industry rumours that PCs’ very existence is threatened, Mr Yuanqing said this industry is here to stay.
“The PC market is stable and growing both volume-wise and revenue-wise. It’s a $200bn industry and to find another such big industry is probably not easy. But we need to make this industry smarter and connected and that is our job to do.”