Lenovo is making money selling handsets in China

Lenovo is making money selling handsets in China
Back in November, Lenovo CEO said it would take the company two to three more quarters before it showed a profit in China. The executive blamed this on the cost of marketing and building out a sales channel. But on Wednesday at the World Economic Forum in Davos, the company's CFO, Wong Wai Ming, said that China is already profitable for Lenovo when it comes to smartphones. The country is the world's largest smartphone market and over the last year, Lenovo has seen its market share in China soar from 1.7% in 2011 to 15% in 2012. The stunning rise has allowed Lenovo to capture the second largest slice of the Chinese smartphone market. Research firm Gartner predicts that Lenovo will surpass Samsung in 2013 to be the number one smartphone manufacturer in the country.

But despite this heady rise to the top of the pack, Lenovo is unlikely to see any increase in profit margin, especially in such a competitive atmosphere. With the price of entry-level smartphones dropping 40% to 50% in a year (according to the CLSA), and with newer models sporting larger screens and faster processors, margin expansion is difficult. At the same time, it might be more difficult to succeed in the high end of the market for a company that started out playing in the low-end. But CFO Wong points out that Lenovo has strong smartphone sales in emerging markets like India, Indonesia, Vietnam and Russia. "Just a couple of months in, the numbers are good, but from a very low base," said the executive. "We go into China, get enough volume to make money, then go into other markets," he continued.
Last month, we passed along the top five Chinese smartphone manufacturers in the country. As previously mentioned, Samsung was on top with Lenovo second. Coolpad was third followed by ZTE and Huawei. Apple? The iPhone producer was number six.

source: WSJ



2. jbreault

Posts: 36; Member since: Mar 04, 2012

at some point china will have the same problem as the rest of the world rising wages when that happen it will make it harder for them to compete. but why the cost of labor is still low they will keep us all happy with all the nice new toys. and lenovo is one of the best they make some of best stuff so keep it rock-in lenovo

1. MeoCao unregistered

I'm sure Lenovo and other Chinese phone producers are illegally helped by the Chinese gov't so foreign companies like SS, LG, Sony .. have to compete with dumping tactics by the Chinese. Hat's off to SS, despite adversities it is still the leader but this year will be very difficult for foreign companies in China. It was a wise move from Moto to withdraw from the market.

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