Tuesday, April 16, 2013

PC shipments fall but Lenovo picks up market share

2013 first quarter PC shipments suffered the steepest decline yet as consumers chose smartphones and tablets over PCs. However, while consumers flock to other devices, the professional PC market, which accounts for half of overall PC shipments, continues to grow.

Overall, quarterly PC shipments fell 11.2% based on Gartner data. While HP still held on to the top spot, the number of its shipments fell 24%.Dell, the third largest OEM saw its PC shipments decline 11.2% and Acer’s declined 29.3%. Lenovo, however, saw shipments increase 0.1% for the quarter. Not much of an increase, true, but it was the best performer during first quarter and will likely overtake HP’s number one spot soon.

While HP and Dell are working on reinventing their business strategy, Lenovo has focused on the PC market in emerging markets, in particular China and Brazil. In China, the company has a 40% share of the PC market whereas in Brazil it has acquired CCE, a Brazilian computer maker as well as invested in a manufacturing facility within the country.

Like its competitors, Lenovo realizes the shift from PCs and has also added smartphones in its product portfolio. It is the second largest selling brand of smartphones in China market, surpassing Apple. The company is taking a similar approach it has taken with PCs and is focusing on emerging markets such as Russia, Indonesia, India, the Philippines and Vietnam.

Lenovo credits its supply chain as part of its success. It differs from other major OEMs in the fact that it is a hybrid supply chain, meaning up to one-third of its products are manufactured in-house and the remaining is outsourced. Lenovo has about 8 in-house plants and 24 outsourced sites in China, Europe and South America. The company believes this supply chain model helps in producing innovative products and getting these products to market quicker. Also, by keeping part of the production in-house, it enables greater speed and flexibility in shifting its product mix in order to mitigate potential supply chain risk.

Evidently Lenovo is benefitting financially as a result of this supply chain model and focused business strategy. For the April to September 2012 time period, revenue was up 21.7% compared to same period in 2011 while gross profit was up 19.1% for the same period. In comparison, HP suffered declines in both revenue and profit for each quarter throughout 2012.