Lenovo, the world’s largest computer maker, has posted its first sales decline in more than two years after the global PC market suffered its worst quarterly downturn on record.
A zero-Covid policy of frequent lockdowns in its home market of China has damped retail demand and disrupted businesses. Lenovo said it accounted for a 12 per cent drop year on year in fiscal second-quarter sales in China, as overall revenues fell 4 per cent to $17.1bn — their first decline in 10 quarters.
“Lenovo once again delivered solid results, even in a challenging global market,” said Yuanqing Yang, chair and chief executive.
With a deteriorating macroeconomic situation and high inflation in key markets, analysts say consumers and businesses are being more cautious in their spending, which has hit PC sales and shipments.
Research company Canalys reported on Wednesday that total PC and tablet shipments fell 14 per cent year on year in the third quarter to 105.6mn units. Lenovo shipped 19.4mn units in the third quarter, down 21 per cent and falling behind Apple, which shipped 23.4mn units. Global desktop and notebook shipments fell 18 per cent in the quarter, a record year-on-year decline.
Yang said in a Reuters interview that Lenovo’s decreasing sales in China were related more to commercial clients. In contrast, there was weaker consumer demand in other markets, such as the US and Europe, influenced by high inflation. He told Bloomberg that Lenovo could not sell some of its most advanced computers to clients in China because of the latest US chip curbs.
While Apple supplier Foxconn has taken a production hit from workers fleeing its factory in Zhengzhou to escape Covid-19 controls, Yang said Lenovo’s plants were not affected and were “still operating very well”.
Lenovo has built new factories in Tianjin and Shenzhen as well as in Hungary, and expanded its factory in Mexico. Its plants in Shenzhen and Wuhan were described by Chinese state media as model factories in the fight against Covid in 2020 and 2021.
To help offset declining PC sales, the company has been diversifying into areas such as cloud computing, servers and smartphones. New businesses and cost-cutting helped lift profits for the September quarter by 6 per cent to $541mn, beating analyst expectations of $473mn.
During its earnings call, Yang said Lenovo had been investing in non-PC segments for years and would continue rebalancing resources to the new areas.
“For Lenovo, these results prove that our strategic foresight, operational resilience and consistent investment in diversified growth engines have prepared us well for challenging times,” he said.