China’s Lenovo Surpasses HP as Largest Global PC Maker

By Dezan Shira & Associates

Posted: 16th October 2012 09:26

The days of American dominance over the PC market seem to be coming to a close. According to the research firm Gartner, Lenovo captured a market share of 15.7 percent in the third quarter of 2012, topping HP’s 15.5 percent, ousting the PC giant from the leading position it held for the past six years.

For years, the global computer industry was controlled by U.S. companies, with top spots held by IBM, Dell, Compaq and, later, by HP (which acquired Compaq in 2005).

Lenovo, founded in Beijing in 1984, burst onto the global scene when it purchased IBM’s flagging PC business in 2002. It has since flourished, stimulated by a large domestic market and competitive pricing.

Aside from dominating its domestic market, Lenovo has been successful in diversifying its product and expanding its international presence, boosted by the acquisition of Brazilian electronics maker CCE, valued at US$148 million, as well as U.S. cloud computing firm Stoneware.
It is also one of the first IT companies to develop region-specific marketing and development strategies, placing countries into one of two categories – emerging markets, such as the BRICS, and mature markets, such as the United States, European Union, and Japan.

“We are establishing even deeper roots in each major market around the world. In addition to localized sales and distribution teams in major markets, we are establishing an even stronger manufacturing footprint,” Lenovo Chairman and CEO Yang Yuanqing said in a public statement.
Rival research firm IDC still places HP in the lead, but this provides little consolation for the HP giant. By even the most liberal estimates, HP is leading its Chinese competitor by under half a percentage point and the company is expected to see a decline in both the domestic and international PC markets in the coming years.

Gartner estimates that in the third quarter alone, global shipments of PCs have declined over 8 percent to 87.5 million, the sharpest drop since 2001. While this is partially due to customers waiting until the release of the Windows 8 operating system before purchasing a computer, the drop is also related to long-term trends, such as the rise of the Apple iPad and other tablet computers. IDC forecasts indicate a considerable increase in mobile computing device sales over the next few years, with sales estimates of 117.1 million units this year, 165.9 million next year, and as many as 261.4 million by 2016.

Lenovo recognizes these trends, and while the new ratings are certainly an encouraging sign, the company is not celebrating just yet.
“Becoming the clear leader in global PC share of course remains one of Lenovo’s aspirations, but it also only represents one more milestone in our journey as a company and our mission to become the leader in the PC+ era. This includes PCs, tablets, smartphone, smart TV, cloud and enterprise computing,” Yang said.

In light of Lenovo’s rise, HP CEO Meg Whitman is intensifying her efforts to push HP away from the sinking PC industry towards more promising markets like data analysis and software. The company has recently announced that profits will be smaller than initially projected, and shareholders are losing faith in the administration’s ability to innovate and rejuvenate.

No matter who is currently leading in production and sales, it is becoming increasingly difficult for any company to record profits in this extremely competitive market. Innovation, globalization, and diversification are essential in keeping PC producers afloat and whichever company manages to do that best is most likely to emerge the victor.
 

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
 
For further details or to contact the firm, please email info@dezshira.com or visit www.dezshira.com

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