Under Lenovo's AI ambitions, what will it do to fill the technology gap?

@科技新知 Original

Author丨Xiao Wei Editor丨Saike

Lenovo's performance put satellites.

On August 15, 2024, Lenovo disclosed the group's results for the first quarter of fiscal year 2024-25 (ended June 30). Lenovo's revenue exceeded the 100 billion mark, reaching 111.9 billion yuan, a year-on-year increase of 20%; According to non-Hong Kong financial reporting standards, net profit was nearly 2.3 billion yuan, up 65% year-on-year.

Compared with the downturn in the PC business in the past few years, Lenovo's revenue in this fiscal quarter can be described as high-spirited, and CEO Yang Yuanqing has repeatedly stated that Lenovo's performance has ushered in an inflection point.

Despite the blessing of the aura of AI, it is not yet a contribution, and any words that make people look forward to in the technology industry are worth taking a closer look.

Part.1

After waiting for three years, Lenovo survived?

It is not so much the victory of Lenovo's AI route as the replacement cycle has finally arrived.

As we all know, the global PC market has been weak for a long time, the last peak of shipments, but also back in 2011, the shipment of 365 million units can be called the sunset of the PC market, since then for seven consecutive years have seen a year-on-year decline, if it is not for the 2019 epidemic black swan caused by the sharp increase in demand for home office, only to barely reverse the decline curve of PC shipments, then the PC market is likely to be a wave of contraction that lasted for more than 10 years.

According to IDC data, after two years of decline, the global PC market finally recovered in the first quarter of this year, with a total shipment of 59.8 million units, a year-on-year increase of 1.5%. This level is the same as in the first quarter of 2019.

It is clear that Lenovo's performance in the past two years is strongly tied to the market cycle. As for whether there is an inflection point in the PC market, IDC is optimistic, mainly based on the deep integration of AI and PC that has been popular in recent years.

It is expected that this year will be the first year of rapid development of AI PCs, and the proportion of AI PCs in the overall PC market will reach 55% in 2024 and 85% in 2027. At the same time, market research firm Counterpoint also predicts that AI PCs will account for 3/4 of the entire PC market by 2027, and nearly 500 million AI PCs will be sold between 2023 and 2027.

The market trend believes that laptops with AI-focused features are becoming the new darling of the market, and what is Lenovo's share in this huge potential market space? CEO Yang Yuanqing revealed that Lenovo's AI PC shipments in China accounted for about 5%. The bigger expectation lies in the future: Lenovo plans to achieve 10% of its shipments by the end of the year, 25% globally next year, and close to 50% in 2026.

Ambitious Lenovo may have to face another market trend, and Counterpoint expects the entire PC market to grow slowly at a CAGR of about 3% between 2023-2027, a figure that is definitely not good news for the PC giant.

Don't forget how much Lenovo's performance struggled in the 2023 fiscal year, affected by the weak demand in the PC and server markets, Lenovo's revenue fell by 8% year-on-year and net profit fell by 37% year-on-year. Although Lenovo's shipments still rank first in the market, far exceeding manufacturers such as HP, Dell, and Asus, the alarm has been sounded when the annual growth rate fell by 19%.

Based on this background, it also explains how eager Lenovo is to convey optimism to the market after the highlight performance of this quarterly earnings report. After all, after the arrival of an average replacement cycle of 4-5 years, after announcing a strategic investment of 14.5 billion yuan from Saudi fund Alat, many people are looking forward to seeing a different association.

Obviously, on a digital level, it did.

Part.2

How to shore up AI ambitions

Some institutions believe that 2024 is the first year of AI PCs, and 45% of new laptops shipped will have AI functions. And Yang Yuanqing believes that 10% of PCs will be replaced with AI PCs this year.

Obviously, ALL in AI is Lenovo's strategic direction in the future, but it is still questionable whether Lenovo can support its AI ambitions.

Let's start with the genes. Lenovo can become today's Lenovo because of its internal factors. At the beginning of its establishment, Lenovo's personnel were mainly from researchers from the Chinese Academy of Sciences, with technology and products, and more marketing work was done after facing the market, so it developed smoothly in the early stage, but then Lenovo faced a route choice: adhere to the self-developed technology route led by Academician Ni Nanguang, or take the trade route that Liu Chuanzhi is optimistic about.

History tells us that Lenovo chose the latter at that time, and the company's growth trajectory is full of marketing-driven colors. Looking back on Lenovo's growth route, the acquisition of IBM's Thinkpad computer business in 2004 was regarded as a snake-like merger and acquisition case in the industry, and Lenovo took this as a starting point to enter the international market and succeeded; In 2014, Lenovo acquired IBM's x86 server business again; During the same period, it acquired Motorola's mobile phone business and continued to expand its business boundaries and market share. In 2018, after the growth rate of computer and mobile phone shipments slowed down, Lenovo slipped from the first position in the market, and in order to compete with HP and Dell, it spared no expense to acquire Fujitsu's manufacturing subsidiary in Japan, and once again improved its production capacity and complete machine quality.

It is true that the production of an ordinary notebook computer, the parts involved are divided into 31 categories, a total of more than 1600, logistics, design, assembly and other aspects of all aspects, the need for strong management capabilities, Lenovo was established for 40 years through continuous mergers and acquisitions to expand, precipitation of these valuable experience in the manufacturing industry. But the same route can not only help Lenovo quickly become a top player in the global PC market, but also make Lenovo lose the historical opportunity to master the core technology.

Let's take a look at Lenovo's suppliers, the chips are from Intel, the operating system is from Microsoft, the hard disk memory is from Samsung, the components are from Foxconn, and the display panel is from AUO. Among the list of suppliers, only their own names are missing, which undoubtedly confirms the name of Lenovo's assembly master.

Obviously, this is not a glorious title, especially considering the influence and volume of Lenovo as a domestic super-first-line technology company, it still uses the assembly of computers as the main source of revenue, and the low R&D investment has been criticized by the outside world, which is too far away from the public's expectations.

In fact, Lenovo has always been aware of the problem, and the financial report release specifically emphasized that the revenue of non-PC businesses accounted for nearly 47%, a record high.

After the release of the quarterly report, Yang Yuanqing, chairman and CEO of Lenovo Group, continued to cheer investors on the one hand, saying that Lenovo will begin to resume comprehensive business growth before two quarters in 2024; On the other hand, it has repeatedly said that Lenovo's bet on AI PCs and AI mobile phones will bring huge growth space, and even said that the growth rate of artificial intelligence infrastructure is at least 2 times the growth rate of traditional infrastructure.

The subtext is obvious, and the highlights of Lenovo are far more than what is in front of you. However, the question arises: Can Lenovo's DNA support its AI ambitions?

In fact, the contribution of AI PCs to Lenovo has not yet been seen. According to Liu Jun, executive vice president and president of Lenovo China, "the proportion of AI PC sales is still very small, and it has not yet had a very significant impact on revenue and profit in the first fiscal quarter."

Part.3

If you take it, you can't grasp the soul of AI

As early as 2017, as the CEO, Yang Yuanqing wanted to "gamble his life to do AI", and in the same year, Lenovo's AI lab landed in Beijing.

Seven years have passed, and the words are still in my ears, but in terms of influence and performance, Lenovo's AI is not as powerful as expected. On the contrary, strong opponents are appearing in front of Lenovo.

Huawei sits on the Harmony OS ecosystem, as well as the Kirin PC processor and Kirin 9000S mobile phone processor, which has considerable advantages in the basic layer of the AI field. Honor started AI even earlier than Lenovo, in 2016 released the Magic Live intelligent system, and in 2022, it created MagicOS 7.0 platform-level AI capabilities, up to now, Honor has continued to invest 10 billion in research and development expenses, reaching 2100 AI patents, AI intent recognition more than 600 categories; Looking at the old rivals Apple and Microsoft, the two giants have very tacitly announced that they will cooperate with OpenAI, and the inside story is worth playing. Microsoft's incubation of OpenAI, the idea of not flowing fat and water is not difficult to understand, and Apple's cooperation with OpenAI can better illustrate the degree of thirst for AI by giants with chip and hardware capabilities.

In September last year, Lenovo made a high-profile appearance on an AI PC, announcing that it would jointly build an AI solution with Microsoft "AI Twin", and pulled up the NVIDIA platform, which is eye-catching enough, but it is really unknown how long the AI solution that does not master the soul can give Lenovo an influence endurance.

AI PCs are a huge opportunity for Lenovo to consolidate its high-end route. According to data from Canalys, in the second quarter of 2024, shipments of Windows PCs priced above US$800 (about 5,715 yuan) increased by 9% quarter-on-quarter, while shipments of AI PCs in this price range soared by 126%.

That's the real reason why Lenovo has to keep up with AI anyway, and for a super manufacturer, no orders mean no future. According to the data, in fiscal year 2023, Lenovo Group paid 209 million US dollars for "severance and related expenses", or about 1.493 billion yuan. As of the 2023 interim report, Lenovo Group's global number of employees fell from 82,000 to 77,000, which shows how urgent the business situation is.

In view of the urgent need for AI, the idea of taking it is more in line with the current association. In April this year, Lenovo's Lenovo Venture Capital was reported to have invested in more than 50 AI-related companies, involving algorithms, computing power, data and other fields, and covering multiple vertical industries such as autonomous driving, intelligent manufacturing, and smart healthcare.

However, there is an obvious problem with the investment of the take-it-or-leave-it doctrine: digesting, transplanting, and internalizing external AI technology into AI PC requires a process and even more time. And the acceleration of this round of AI PC is a race against time.

Every time a technological trend arrives, it means that it requires learning, patience, and investment, and many things cannot be rushed, both for individuals and for enterprises. Remembering an old thing, in 2020, Lenovo tried to land on the Science and Technology Innovation Board, and the listed company needed to meet the requirements of more than 5% of operating income in R&D investment in the last 3 years, or more than 60 million in R&D investment in the past 3 years, and Lenovo announced that it would invest 10 billion yuan in R&D, but according to the 2020 revenue of 417.567 billion yuan, Lenovo's R&D investment accounted for only 2%, and it did not exceed 5%, and the road back to the GEM was stranded.

An embarrassing alarm sounds, but being in the wind also means that you have to get used to the noise, and the real thoughts are hidden under the various voices, but there is always something that does not lie.

This article is from Xinzhi self-media and does not represent the views and positions of Business Xinzhi.If there is any suspicion of infringement, please contact the administrator of the Business News Platform.Contact: system@shangyexinzhi.com