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Lenovo Booming Chip Shortages Not A Problem Chinese Company Claims

Lenovo who is having a record run in Australia with sales up across several categories including consumer PC’s and gaming claims they are exempt from the semiconductor shortages impacting the PC and TV industries.

Overnight Chinese PC maker Lenovo Group expressed confidence that its production will not be disrupted by the semiconductor shortages and that they are in a strong position to grow and will shortly launch several new products.

“We continue to manage the impact, being by far the largest PC manufacturer and supplier in the world,” Gianfranco Lanci, president, and chief operating officer, claimed during an online earnings call.

Lenovo a major supplier to JB Hi Fi, Harvey Norman and The Good Guys is also pushing their own online sales operation for business PC’s and consumer products.

“It is very clear that there are some capacity limitations” in chip manufacturing, he said, adding that as the biggest personal-computer chip consumer, “We are always in a better position to get what we need.”

Lanci, 66, said that he will retire from the company in September after nine years in management.

He previously worked at Acer.

According to IDC research global PC shipments grew 26.1% year-on-year during the October-December quarter to 91.6 million units, this has benefitted Companies such as Acer who saw sales grow by over 119% to more than $700M in the USA and in Australia the Taiwanese Company is set to report double digit growth. HP sales have fallen as Dell, Acer and Lenovo sales grew during the COVID-19 pandemic.

Lenovo outpaced the market by increasing its sales volume by 29% globally.

The growth pushed HP from the top position leaving Lenovo with the top global position with a market share of 25.2%, up half a percentage point from a year ago, according to IDC.

Main rival HP saw its share drop to 20.9% from 23.7%.
Overall quarterly revenue increased 22% to $17.25 billion and net profit rose 53% to $395 million, both new highs for the company.

Buoyed by the figures, Lenovo’s shares hit a six-year high of HK$10.50 on the Hong Kong Stock Exchange last night before closing at HK$10.16, up 4.6%.

Yang Yuanqing, chairman and CEO of Lenovo, claimed that his bullish market forecasts had come true.

“For several quarters, I have predicted total PC shipments to reach 300 million units in 2021, and many people said it was too optimistic,” he said, noting that IDC calculated sales last year reached 302.6 million machines.

He sees sales climbing even higher.

The Yoga 9i convertible features a rotating soundbar hinge.

“The pandemic has definitely changed the consumers’ behaviour,” he said, predicting that the replacement cycle for PCs and tablets will speed up given the heavy use they are now getting.

“Demand is pushing the PC market forward and all signs indicate this surge still has a way to go,” said Ryan Reith, program vice president at IDC’s Worldwide Mobile Device Trackers.

“The obvious drivers for last year’s growth centered around work from home and remote learning needs, but the strength of the consumer market should not be overlooked,” he said.

“In retrospect, the pandemic not only fuelled PC market demand but also created opportunities that resulted in a market expansion,” Reith said, pointing to new highs in sales of gaming PCs and monitors.

Bracing for higher demand, Wong Wai Ming, executive vice president and chief financial officer at Lenovo, said the company “continued to secure critical parts to fulfill strong future demand.”

That, in turn, led to more of the company’s cash getting tied up in inventory, with the total on its books rising to $5.79 billion as of Dec. 31, up 45% from a year earlier.

“Supply dynamics remain a challenge for the sector,” Wong said.

Lenovo’s mobile phone business which includes Motorola turned a pre-tax profit of $10 million for the quarter, rebounding after three quarters of losses.

The number would have been higher, Wong said, “if it wasn’t for high freight costs and the industrywide component shortage.”

“Every segment of the supply chain was stretched to its limits as production once again lagged behind demand during the quarter,” said Jitesh Ubrani, research manager at IDC’s Mobile Device Trackers.

“Not only were PC makers and ODMs (original design manufacturers) dealing with component and production capacity shortages, but logistics remained an issue as vendors were forced to resort to airfreight, upping costs at the expense of reducing delivery times,” Ubrani said.

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