Smartphone maker shoots for the stars

As the pc market fades, lenovo wants to become a global leader in top-end mobile phones

Chinese personal computer giant Lenovo Group Ltd is aiming high to become a leading player in global smartphone sales, building up its branding and expanding abroad aggressively.

Lenovo, already the world's top PC maker, is not shy about its towering ambitions as it battles for market share against rivals such as Samsung Electronics Co Ltd of South Korea and Apple Inc of the United States.

In a new marketing campaign, the Beijing-based company invited National Basketball Association star Kobe Bryant on stage in the capital this month to promote its flagship smartphone products.

Lenovo hopes Bryant will help attract millions of youths in China, the group with the strongest demand for the latest smart devices. Tens of millions of people play basketball in China, and many are fans of NBA teams and players.

Liu Jun, senior vice-president of Lenovo Group, is responsible for the company's mobile phone business. He expects Lenovo to ship up to 60 million smartphones in China this year.

"Lenovo is the smartphone brand with the fastest growth rate worldwide," Liu said at a briefing in Beijing.

According to SINO Market Research, Lenovo has been the second-largest smartphone vendor in the domestic market for 13 consecutive months, behind Samsung.

Lenovo aims to become the top smartphone player in China within two years.

In previous interviews, Chief Executive Officer Yang Yuanqing has said Lenovo needed another successful transition, since the traditional PC business is in structural decline. Yang said that smartphones are Lenovo's new opportunity.

Analysts have been taken by surprise at Lenovo's surge in the smartphone sector, because it announced plans to expand in the mobile phone sector only about three years ago. In 2008, Lenovo sold its mobile business to "concentrate on the PC sector" but bought it back a year later.

"Lenovo's close ties to Chinese telecom operators have been a major reason for its success in the domestic market," says Li Yanyan, analyst with the research firm Analysys International.

"Through cooperation with carriers, Lenovo swept the Chinese market by offering a large quantity of low to mid-end smartphones. Now, the company also wants to explore the high-end smartphone market," she said.

However, Lenovo has to reduce its reliance on the home market and grow its businesses internationally, says Nicole Peng, an analyst at research firm Canalys. "To go global, Lenovo needs to invest in patents and establish local teams and channels."

Liu says: "We have very aggressive plans to explore overseas markets."

The company has tested the waters in several emerging countries, including Russia, India and Indonesia, since last year and the results have been encouraging. In some of those markets, Lenovo smartphones garnered a 5 percent share within three months, according to the company.

Liu adds that Lenovo will enter 30 more emerging countries by the end of the year. By then, the company will have realized its goal of covering 80 percent of emerging markets worldwide.

More meaningful moves are in store for the first half of next year, when Lenovo plans to introduce its smartphones to mature markets such as the US and Europe, Liu says.

"We hope the overseas market will contribute more than half of Lenovo's total smartphone revenue in the long run."

Globally, Lenovo ranked as the fourth-largest smartphone vendor in the second quarter, shipping a record 11.3 million handsets behind Samsung, Apple and LG Electronics Inc, IDC says.

China has surpassed the US to become the world's biggest smartphone market. According to Canalys, smartphone shipments in China reached 88 million in the second quarter, accounting for one-third of all shipments worldwide.

Boasting a huge smartphone market volume, together with the largest mobile population, China will naturally become a hotbed of mobile phone innovation and production.

Although Chinese brands are not household names such as Samsung and Apple, many Chinese handset makers have successfully made their way into the top 10 globally, thanks to high-volume shipments of low to mid-end mobile phones.

Shenzhen-based Huawei Technologies Co Ltd and ZTE Corp, traditionally known as telecom equipment giants that compete with rivals such as Sweden-based Ericsson, now hope to found smartphone empires.

Huawei's and ZTE's overseas expansion into the mobile phone business came much earlier than that of Lenovo.

By building telecom networks for carriers worldwide, Huawei and ZTE formed good relationships with local operators and managed to make inroads in many markets by using those operators' distribution networks. Huawei and ZTE mobile phones are now a common sight in many emerging countries in Africa and Southeast Asia.

Those two Chinese companies have already extended their reach to more mature and profitable markets, such as North America and Europe.

ZTE established a North American business group earlier this year, and it will report directly to its core management.

ZTE was the fourth-largest mobile phone vendor in the US by shipments in the second quarter, with a market share of 6.2 percent, behind Samsung, Apple and LG, says the research firm ITG.

All of the major US telecom carriers, including Verizon Communications Inc, AT&T Inc and T-Mobile International AG, have worked with ZTE in selling its handsets, says He Shiyou, executive vice-president of ZTE.

It was not easy to reach that stage, He says, noting that ZTE did not even crack the top 10 in the US mobile phone supplier market two years ago.

Huawei expects to ship 60 million smartphones worldwide this year, which would be almost double last year's 32 million units.

Although Huawei has faced hurdles in its telecom equipment business in the US because of national security concerns there, Richard Yu, chairman of Huawei Consumer Business Group, says Huawei is still committed to the US smartphone market.

"As time goes by, more consumers will trust Huawei," Yu said in a television interview.