Tech Edge

Lenovo: China no longer our most lucrative market

Lenovo CFO: Seeing more growth outside China
Lenovo CFO: Seeing more growth outside China

Lenovo, the world's largest PC maker, is intent on becoming a global brand as it shifts its focus away from China, the firm's chief financial officer told CNBC.

China is still the PC and smartphone maker's largest market, contributing 38 percent to the group's total revenue, while Europe, the Middle East and Africa contributed 25 percent and the Americas 21 percent, the firm reported on Wednesday. But these latter regions show more promising growth potential, Lenovo CFO Wong Wai-Ming told CNBC on Wednesday.

"I think today Lenovo is a global company. Obviously, our largest market is in China, but as a global company you have to work in different countries, and if you really look at the growth of our business we have substantial growth from outside China," Wong said.

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Testament to this, Lenovo's China revenue only grew 1.3 percent in 2013, while revenue from the EMEA and the Americas climbed roughly 30 percent each.

While China used to account for 60-70 percent of Lenovo's business, Wong said it now represents a considerably smaller proportion.

"It has been very, very profitable.... but in China today the market is actually declining 10 percent year on year," he said, adding that did expect business there to pick up with improvements in China's economy.

Hong-Kong listed Lenovo Group overtook Hewlett Packard last year as the world's largest PC vendor by unit sales, but has been shifting its focus away from the declining PC market towards tablets and smartphones recently.

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The firm aims to sell 100 million smartphones by 2015, with the goal of becoming the global smartphone market's third largest player.

Lenovo has the second largest share in China's smartphone market, after Samsung, but faces some obstacles there, where many analysts believe the market is already maturing.

"In China we are number two today but we still have a long way to go before we can be dominant there... our China smartphone [business] is not losing money but not making a significant amount of money," said Wong.

A woman exits past an advertisement for Lenovo Group Ltd. at a computer market in Beijing, China, on Thursday, Feb. 17, 2011. Lenovo Group Ltd., China's biggest maker of personal computers, is expected to announce third-quarter earnings today.
Bloomberg via Getty Images

According to research firm Canalys, total smartphone shipments in China dropped 2 percent in the first quarter of this year, from the final quarter of 2013 to 97.5 million units.

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"I think China's smartphone market is very competitive especially in the last few quarters we saw many new competitors coming in," he added, echoing comments from Lenovo CEO Yang Yuanqing who said earlier this week that China was the "most fiercely competitive smartphone market in the world", the Wall Street Journal reported.

Lenovo plans to accelerate its smartphone business in markets outside of China, but faces stiff competition from smartphone giants Apple and Samsung. Wong told CNBC there were still opportunities outside of these two tech giant's territory, however.

"The market is very big. Apple or Samsung obviously have their market share, but if you really look that I think you have a clear market opportunity with the market growing about 20 or 30 percent, especially in main line products as well as in the emerging markets," he added.

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The Chinese tech firm announced plans to acquire U.S. telecom firm Motorola Mobility from Google for $2.91 billion in January. A week prior to that, the PC and smartphone maker also said it would purchase International Business Machine's low-end server business for $2.3 billion. Both deals are yet to gain regulatory approval.

Wong told CNBC they were keen to leverage on Motorola's momentum and help transform the business into a global company. Analysts have said Motorola's close ties to carriers and distributors can help increase Lenovo's global presence in smartphones.

Lenovo Group reported a near 29 percent jump in full-year profits on Wednesday driven by record smartphone sales. The company sold 50 million smartphones in 2013, almost matching the 55 million PCs sold over the same period, while 9.2 million tablets were sold.