China shifts to replace U.S. Hardware
The U.S. state department in 2006 banned the use of Lenovo computers after a threat of hardware or software emerged as a cyber-espionage threat to the U.S. government. China has begun developing its hardware in response to the ban; this will see more orders for Lenovo. Lenovo might have scored a small victory due to the technological wars between the U.S. and China. All government offices and public institutions have been ordered to remove remote computer equipment, including software within three years, and this seems like a pyrrhic win. As a result of the directive, over 30 million computer hardware pieces will need to be replaced. Lenovo is the preferred brand in China shall get a large volume of orders as it will replace U.S. rivals HP, Dell, and Microsoft.
The removal of U.S. suppliers in China will create new supply chain disruptions for local suppliers. Lenovo included all this is contingent on the speed of development of homemade software systems by China to replace the U.S. made ones such as Apple’s macOS and Microsoft’s Windows.
Lenovo’s increase in China’s sales will not offset the U.S. loss as a third of the Lenovo revenues comes from the Americans, and only a fifth comes from China.
Dell and Hp altogether have 39% of the local P.C. market, whereas Lenovo has a quarter.
The lingering question for Lenovo is whether it will be caught in a tight spot currently Huawei is undoubtedly in, and the current tiff between the U.S. and China is proving tough for the tech industry. Lenovo is no exception even though the CEO Yang Yuanqing, is optimistic about the situation and does not seem worried. Huawei is currently making its operating system even though there is no alternative for the Android operating system. Lenovo should be prepared in the event a similar situation faces it to avoid being extinct. The CEO believes Lenovo is a global company with many businesses spread across the world with a more robust supply chain that cannot be compared to rival companies. It is a transparent company when it comes to security and compliance, and the CEO does not think the U.S. government will target it. Since smartphones and Pcs have not been slapped with tariffs yet, Yang believes Lenovo should manufacture its products in China.
The U.S. and China economies are too large to be ignored by each other. Hopefully, during the upcoming G20 summit, they will make up as retaliatory responses hurt each other’s economy, and Lenovo has thus no reason to worry.
For the financial year, 2018/2019 Lenovo reported record-breaking revenue of $51 billion with P.C. being the cash cow accounting to 32 percent of the revenue. Hence it is rated one of the most important markets for Lenovo.
The next round of trade war could be brutal even though Lenovo is trying to play it cool and is planning to increase capacity at its manufacturing facilities outside China to insulate itself against tariff hikes even though Pcs and smartphones are still exempted in the U.S. market
Let us know If you have any questions or suggestions about the future of Lenovo. Share your thoughts in the comments section!
Do you know anyone who would like to read the information in this post? Share it with them on Facebook, twitter and LinkedIn.
Please remember that sharing is caring!