China’s Lenovo warns PC shipments will fall

Hong Kong — China’s Lenovo Group warned on Thursday that shipments would fall in the short term as China’s Covid-19 lockdowns shortages of microchips, after posting its slowest quarterly growth in seven quarters.

The world’s largest maker of personal computers is among many companies facing supply chain headaches that have been worsened by a protracted shortage of chips, business disruptions from the Russia-Ukraine war and China’s efforts to stop the spread of Covid-19 in the country.

“Due to the macroeconomic headwinds, the shortage is weighing significantly in the very short term,” Luca Rossi, executive vice- president of Lenovo, said in a post-earnings call.

“Specifically in this quarter, the manufacturing shutdowns will impact the total shipments in basically everywhere, particularly in the People’s Republic of China,” he said. Demand is also being curbed by geopolitical tension and inflationary pressure.

Lenovo CFO Wai Ming Wong said the company’s Shenzhen factory operations were affected during the quarter. The southern Chinese city imposed a one-week lockdown in March and conducted many rounds of testing after a jump in Covid-19 cases.

The company said it was seeing easing in supply shortages for the PC segment, but said its smartphone and data centre businesses were still under heavy pressure.

A bellwether for the global PC market, the Beijing-based company led the market with a 23.1% share in the January-March period, according to data from research firm Counterpoint.

A rush to buy PCs to work at home during the pandemic culminated in record sales and profit for Lenovo in the December quarter. But sales have begun to lose steam as China, the company's biggest market, has been hit by the Omicron variant, keeping consumers at home and shutting factories.

The company’s revenue rose to $16.69bn in the March quarter from $15.63bn a year earlier, below an average estimate of $17.36bn from nine analysts, according to Refinitiv. That amounted a 6.8% year-on-year rise, its slowest growth in seven quarters.

However, profit attributable to shareholders jumped to $412m, exceeding analysts' expectations.

Lenovo also reported the annual result for its fiscal year ending in March. Revenue rose 18% to $71.6bn and profit jumped 72% to $2bn, the highest levels for both since the company went public in 1994.

Counterpoint reported in April that global PC shipments fell 4.3% in the first quarter of 2022, as the war in Ukraine and China’s lockdowns pressured already fragile supply chains and added to shortages of components.

Reuters