Exclusive: Why Lenovo isn't afraid of Apple

Arimasa Naitoh, Lenovo’s vice president of development and the man credited as the inventor of the ThinkPad, says he is not afraid of Apple. 

In September the Chinese company celebrated the 20th anniversary of the iconic ThinkPad portable, sales of which – 60 million to date – have greatly contributed to the Chinese company edging dangerously close to pipping HP as the world’s biggest PC maker. 

Addressing media at Lenovo’s Yamato Labs in Japan’s Yokohama, Naitoh bristled at the suggestion he should be concerned about the Cupertino-based tech giant’s market dominance.

“I don’t ignore Apple, but I’m not afraid of them,” he insisted.

There are in fact a number of interesting similarities between Apple and what is emerging as one of only two companies that could seriously claim to threaten it, the other of course being Samsung.

Chief among these is what appears to be Lenovo’s almost dogmatic emphasis on the “user experience”, an endeavour the company says informs everything and everyone at its state-of-the-art Yokohama design facility, acquired when the company bought IBM’s PC business in 2005.

“Something we have been very good at is ‘incremental innovation’,” Naitoh said. Adding to his comments, senior Lenovo engineer and head of competition Kevin Beck stressed that the company’s product testing standards were among the most rigorous in the industry.

He said Lenovo also saw itself as a pioneer in terms of composite fibres, making its products better able to withstand rougher treatment by today’s mobile users and in the process earn more of the coveted MIL specs, used by the US military to assess product suitability. Lenovo is also the preferred PC supplier to NASA.

“Independent reports have shown Lenovo to have a 10 percent lower fail rate than HP and 25 percent less than Dell,” Beck says.

The latest ThinkPad, the X1 Carbon, is the first fully carbon constructed portable product on the market, while also boasting firsts such as fibreglass windows in its interior to allow for better heat management.

Lenovo used the 20th anniversary of the ThinkPad portable to reiterate its track record as the fastest-growing tier-1 PC maker in the world, a feat it recently reported having achieved for 11 quarters in a row. It is now number one in three of the six biggest PC markets: China (35.2 percent), Japan (25.4 percent) and India (17.1 percent) and now has 10 percent or greater market share in a total of 35 markets.

The Asia Pacific/Latin America (APLA) market is a key focus for Lenovo, with the company citing a relatively low PC penetration rate of under 17 percent. In early September Lenovo announced it had bought Brazilian PC and consumer electronics company CCE in a cash and stock deal worth 300 million Brazilian Reais ($A144 million), greatly expanding its footprint in the country while also acquiring significant manufacturing assets.

Lenovo’s APLA head of marketing Howie Lau said the company’s heavy investments in brand building over the years have paid healthy dividends, most notably with the success of the “Those that do” advertising campaign launched in January this year.  Lau said the resulting boost to brand recognition contributed to Lenovo reaching the top spot for global consumer PC shipments in the first quarter just passed.

Closing in on HP 

Analysts expect Lenovo could overtake HP as the world’s No. 1 PC supplier before the end of the year. Reporting its first fiscal quarter last August, the Chinese company revealed its global share had grown to a record 15 percent, bolstered by a 35 percent year-over-year increase in revenue to $US8 billion, and a 30 percent rise in net income year-over-year to $US141 million.

“Even as the overall market dropped, our global market share reached another historic high,” said Lenovo CEO Yang Yuanqing during a conference call with investors in August. “Just a year ago we were behind [HP] the number one [PC maker] by just six points, but now we have narrowed the gap to just seven-tenths of a point.”

As well as reporting strong sales for its commercial products including ThinkPad notebooks, the company also chalked up impressive results for products across its consumer portfolio, especially its Android-based IdeaTab tablets, smart phones – currently only available in China – and smart TVs, while interest is reportedly strong in the company’s recently launched Yoga tablet, one of many new upcoming Windows 8 devices.

While light on detail so far, Lenovo is also moving to expand its presence in the server market, after announcing a joint venture with EMC in August. In May, the company launched its new generation ThinkServer RD530 and RD630 servers, delivering more than twice the memory bandwidth and increased scalability to accommodate larger workloads. Both are powered by Intel’s Xeon E5-2600 processors and signal Lenovo’s biggest effort yet to significantly expand its server footprint outside of China.

Australian Idea

A weapon of growing importance to Lenovo’s is its 4-year-old Idea consumer brand, which encompasses many of the company’s recently launched Android-based tablet products.  

Yet despite the fast expansion of the range, none of its products are available in Australia. In the local market, where penetration rates are much higher, the company is taking a stealthier approach in reaching out to newer markets.

David Heyworth, Lenovo A/NZ’s director of product solutions and alliances, told CRN it was a matter of “when, not if” the Idea range would be rolled out in Australia. He said the company was waiting to realise more growth in the SMB market to provide a stronger foundation for such a launch.

He declined to comment, however, on exactly what that watermark was in terms of SMB market share.

Another key market identified by Lenovo is smartphones.

The company is number two behind Apple in the Chinese smartphone market, with speculation buzzing as to when the company plans to launch a global assault on the dominance of Apple and Samsung. 

Keith Liu, Lenovo’s APAL business development manager for the company’s MIDH (mobile internet digital home) division, confirmed the Lenovo Mobile Access (LMA) service would eventually be launched in Australia following its launch in several key markets back in June. 

Supported by Lenovo’s carrier partners in several countries, LMA is built into a number of Lenovo’s portable computers, including the new ThinkPad X1 Carbon. The service allows users to purchase mobile broadband access on-demand without lock-in contracts and without dongles.

It is currently available in the US, UK, France, Germany, Ireland, Italy, Austria, Belgium, Denmark and the Netherlands.

Liu confirmed, however, that Lenovo had yet to approach any Australian carriers. He would not be drawn on when the company planned to launch its smartphones outside of China and into developed markets such as Australia, except to say that doing so involved big risk and regulatory hurdles with little guarantee of success.

“Not everyone is a winner in the smartphone market,” Liu said.

Nevertheless, Lenovo appears determined to advance what it refers to as its four-screens, PC-plus strategy, encompassing the development of laptops, tablets, smartphones and TVs.

Bolstering its existing development facilities in the US, China and Japan, Lenovo expects early next year to cut the ribbon on its new $US800 million development facility in the central China city of Wuhan.David Binning travelled to Tokyo as a guest of Lenovo.