Lenovo CEO: PC Market To ‘Expand’ As Work From Home Becomes ‘Long Term’

‘The total PC (total addressable market) will be increased by 25 to 30 percent in two to three years,’ says Lenovo Chairman and CEO Yang Yuanqing.

Lenovo CEO Yang Yuanqing said the coronavirus pandemic will increase the total addressable market for PCs by upwards of 30 percent over the next few years as many businesses and educational institutes make working or studying from home permanent.

“The work from home, study at home, e-commerce, online gaming and telehealth will become the new normal and expand the total PC and smart devices market size,” said Yuanqing, during the company’s fourth fiscal quarter earnings report Tuesday night. “We will continue to innovate to meet new demand and focus on the high-growth segments to drive even stronger growth.”

Yuanqing said the surge in remote working stemming from COVID-19 will cause many employees to “work from home forever if their role allows them to do that.” He added that both commercial customers and families are buying laptops to either work or study from home.

“We see this trend is not short term. So it could be long term. It will drive the total PC TAM (total addressable market) to increase,” Yuanqing said. “So the total PC TAM will be increased by 25 to 30 percent in two to three years -- that’s very possible.”

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Solution providers see mobile devices and laptops as the third fastest-growing technology area in the coming quarters, according to a recent study from IPED Consulting. The study found that 45 percent of solution providers see a positive impact in coming quarters for sales of mobile devices and laptops, while 21 percent see sales remaining unchanged, according to IPED (which has the same parent company as CRN, The Channel Company).

Lenovo was hit hard by the coronavirus pandemic as it was forced to completely shut down its manufacturing facility based in Wuhan, China, which caused total revenues to drop 10 percent year over year to $10.6 billion during its fourth fiscal quarter, which ended March 31.

“Our PC manufacturing in China was one of the first to resume full production in the industry,” said Yuanqing. However, the closure caused revenues in Lenovo’s PC and Smart Devices group to drop 4 percent year over year in its fourth quarter, although the company did not provide a sales figure.

Lenovo’s PC and Smart Devices (SCSD) sales for the full year hit nearly $40 billion in sales, up 4 percent compared to fiscal year 2019. The company’s PCSD group reported record pre-tax income of $2.3 billion, up 18 percent year on year, while pre-tax income margins expanded 73 basis point to 5.9 percent.

Worldwide PC shipments declined 12 percent to 51.6 million units during the first quarter of 2020 due to the coronavirus pandemic, according to Gartner. Lenovo captured 24.4 percent of the global PC market share by shipping 12.6 million units, followed by Hewlett Packard with 21.5 percent share, then Dell at 19.7 percent share.

“The single most significant influencing factor for PC shipment decline was the coronavirus outbreak, which resulted in disruptions to both the supply and demand of PCs,” said Mikako Kitagawa, research director at Gartner in a statement. “Following the first lockdown in China in late January, there was lower PC production volume in February that turned into logistics challenges. … Once coronavirus-related lockdowns expanded to other regions, there were new, sudden pockets of PC demand for remote workers and online classrooms that PC manufacturers could not keep up with.”

Lenovo’s president and chief operating officer, Gianfranco Lanci, said the company is currently seeing strong demand for both traditional notebooks as well as its Winbook Chromebook.

“The clear trend we see is that, usually at home, you have one or two PCs -- so it’s one to two PC per family at least in the mature market. It’s really becoming one PC per person and I think this is going to last,” he said. “I don’t think it’s going to just last for the coronavirus impact, but it’s going to last forever.”

Lanci predicts that “a good percentage” of employees will continue to work from home post-pandemic because it’s proven “more efficient” from a company point-of-view and also “better perceived” from an employee point of view.

“What is happening is, I think is TAM expansion when we look at PCs. It’s really a growth of TAM. Then it’s up to us to deliver a good experience on PC,” he said. “So talking about demand, we see a very strong Q1. I think this will continue in Q2.”