Chinese PC maker Lenovo’s hybrid supply chain model allowed it to circumvent the global chip shortage crisis, which has also been felt in South Africa.
So says Yugen Naidoo, general manager of Lenovo Southern Africa, in an e-mail interview with ITWeb.
According to Naidoo, the company is now looking to replicate the success it has enjoyed in the PC market with products such as smartphones, as well as virtual reality and augmented reality, among others.
A hybrid supply chain strategy is one that strives to make the supply chain lean and agile. In a lean supply, wastages are continuously minimised and eliminated, while an agile supply chain is flexible and can respond to uncertainties and sudden developments.
From early 2020, the effects of and the mitigation of the COVID-19 pandemic caused disruptions in supply chains and logistics.
This was coupled with an increase in global demand for PCs owing to some countries’ shift to a stay-at-home economy, and impacted the availability of key chips necessary for the manufacturing of electronics.
Ongoing investment
Lenovo is a global business serving customers in 180 markets around the world, with an equally global supply chain, consisting of over 35 factories and thousands of suppliers, says Naidoo.
“The last two years have taught us that our model of a global hybrid supply chain strategy ensures we can be flexible and resilient through challenging times.
“Supply chain challenges continue to be an industry-wide issue, but our results demonstrate that our size, scale, strong supplier and partner relationships, and unique hybrid manufacturing model, ensured we continue to navigate any challenges and deliver strong results.
“Our supply chain remains a towering strength for the company, and one that we continue to invest millions of dollars in to ensure ongoing transformation.”
According to market analyst firm Gartner, worldwide PC shipments totalled 65.3 million units in the fourth quarter of 2022, a 28.5% decrease from the fourth quarter of 2021.
It says this marks the largest quarterly shipment decline since Gartner began tracking the PC market in the mid-1990s. PC shipments reached 286.2 million units in 2022, a 16.2% decrease from 2021, says the firm.
Lenovo was the overall market leader in the global PC market in 2022, with a market share of 24.1%, and HP a close second with 19.4%, according to Statista.
“Lenovo has impressively maintained solid market share in South Africa, thanks to its strong performance, particularly in the consumer and enterprise business units. According to IDC preliminary reports, Lenovo Intelligent Devices Group (IDG) in South Africa holds 22.1% in terms of market share,” Naidoo says.
Amid the dip in shipments, he comments that non-PC businesses now make up more than 37% of total group revenue.
He points out Lenovo’s IDG is a global operation comprised of the PCs and Smart Devices business unit and the Mobile Business Group.
“Lenovo has more than 30 years of experience in PCs and nearly 40 years of experience with mobile phones. Our portfolio of products, solutions, software and services ranges from PCs and smartphones, to smart collaboration and augmented and virtual reality solutions.
“The group is confident that success in the PC market can be replicated to grow the business beyond PCs and win in more markets, particularly the smartphone space,” says Naidoo.
Lenovo’s second quarter results (released in November) showed IDG maintained strong profitability, outperforming the competition, he adds.
“While the market size of PCs and tablets declined in the short-term − due to the macro-economic environment − long-term, it is still expected to remain higher than pre-pandemic levels. Alongside PCs, the scenario-based solutions market will continue to grow, as Lenovo expands from smart devices to smart spaces.”
According to Naidoo, during this period, the smartphone business achieved its 10th consecutive quarter of profitability, as it continued to enrich its portfolio with new products.
While current external challenges persist, Lenovo remains agile and focused on pursuing its strategy and ensuring ongoing profitability by focusing resources towards its diversified growth engines and driving efficiencies through the business, he adds.
Trend focus
“We see long-term opportunities built on our foundation of ‘New IT’ – client, edge, cloud, network and intelligence – as the global trends of digitalisation and intelligent transformation accelerate,” Naidoo notes.
“The combination of Lenovo’s strategy, strong execution and resilient operations are enabling us to transcend the industry cycle. This, combined with its portfolio, unique hybrid manufacturing and supply chain, will help drive further opportunities to deliver sustainable growth and improve profitability.”
Naidoo says Lenovo’s key investment areas during the past period, and in future, will look at advancing its premium services to meet the needs of customers, increasing supply and availability of premium products throughout the country, and investing in the rapidly-growing gaming sectors and workstations.
“In addition, we will focus on evolving our Infrastructure Solutions Group to develop smarter infrastructure for organisations of all sizes, and the Intelligent Devices Group to deliver PCs and smart devices.”
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