Huawei is undoubtedly in a tight spot right now, and the lingering question is whether other Chinese companies will also be caught in the ongoing mess. Take Lenovo as an example. Although the company had a stellar financial year, many questions asked during the earning calls were about the potential impact of the current tiff between the U.S. and China on it. The manufacturer’s CEO and chairman, Yang Yuanqing, is quite optimistic about the whole situation and doesn’t think it needs to be worried.
Now that various U.S. companies have choked off supplies to Huawei, the Chinese company is trying to become self-reliant. The tech giant already makes its own processors and sources a lot of its components from non-U.S. companies as well. However, since there is no suitable alternative to Android, Huawei is reportedly making its own operating system. Given the current scenario, Lenovo was also probed about its readiness should a similar situation arise.
Yang believes that Lenovo is a global company, with business spread across the globe. He also said that compared to rival companies, it has a more robust and flexible supply chain. Moreover, Lenovo also has manufacturing facilities around the world. Yang also said that when it comes to security and compliance, Lenovo has never been questioned and it’s a very transparent company. That’s why he doesn’t think that they will be targeted by the U.S. government.
Apparently, the takeaway is that if the worse comes to worst, Lenovo will not be affected, although that might not necessarily be true as the company could potentially be cut off from various companies, even if they aren’t American if the current situation continues.
For now, Yang believes that its best to manufacture its products in China, as PCs and smartphones haven’t been slapped with tariffs yet. Lenovo also has no plans to make its own operating systems and chips currently, as it has full faith in globalization and the relation it has with its partners.
In all likelihood, the U.S. and China will make up during the upcoming G20 summit as both the economies are too large to be ignored by each other. Moreover, a hostile environment can have a ripple effect on the tech industry. For instance, a retaliatory response can hurt Apple sales in China, and since the far eastern country is an important market, the Cupertino giant certainly wouldn’t want that. Other than that, Huawei owns many 5G standard essential patents, so most countries can’t afford to block it. Thus, maybe Lenovo really doesn’t have a reason to worry.
For the financial year 2018/19, the company reported record-breaking revenue of $51 billion, with $38.5 billion of it coming from the PC and Smart Devices (PCSD) business. America accounted for 32 percent of the revenue, which means it’s one of the most important markets for the company.
PC is still the company’s cash cow, and the brand remained the top choice for consumers. The Mobile Business Group also managed to turn a profit for the second straight quarter, implying that the manufacturers cost-cutting initiatives are paying off.
Lenovo attributes its solid financial performance to the proper execution of its transformation strategy. For now, everything seems to be going well, and while the company does seem to think of itself as a global company, it can very well be brought to its knees if the tensions between the U.S. and China don’t cool off.
Although Lenovo is trying to play it cool, it was recently reported that it's planning to increase capacity at its manufacturing facilities outside China to insulate itself from tariff hikes. Although PCs and related products are currently exempt from U.S. tariffs, the next round of the trade war could be brutal, and PCs will likely be affected.