July 16, 2013 4:51 AM

Lenovo CEO: Confident About China Market Outlook Long-Term
Personal-computer giant Lenovo Group Ltd. said it is confident about the long-term outlook for its business in China despite the slowdown in the country’s economic growth.

Lenovo Chief Executive Officer Yang Yuanqing smiled during a May news conference. He said the company is confident in its long-term outlook for China. Photo: Reuters
By JURO OSAWA
HONG KONG—Personal-computer giant Lenovo Group Ltd. said it is confident about the long-term outlook for its business in China despite the slowdown in the country’s economic growth.
China’s second-quarter gross domestic product released Monday showed the economy expanded 7.5% from the year earlier, slower than the 7.7% growth in the first quarter. Even though consumer demand in China has so far remained relatively solid, the slowing economic growth is spurring concerns. Market research firm IDC noted that PC shipments in China were weak in the second quarter. Expectations for the third quarter “are being lowered to reflect remaining inventory as well as economic pressures,” IDC said.
“In the short term, (the economy) is definitely affecting our PC growth in China,” said Lenovo Chief Executive Yang Yuanqing at a news conference after the Chinese company’s annual shareholder meeting. “From a long-term perspective, I think PCs will continue to increase.”
Mr. Yang said Lenovo’s strong focus on smartphones and tablets in China will also help the company sustain its overall growth in the market.
Lenovo overtook Hewlett-Packard Co. as the world’s largest PC vendor in the second quarter according to data from research firms. According to IDC, Lenovo’s PC market share in the quarter through June rose to 16.7% from 15% a year earlier, topping H-P’s 16.4% share.
Still, Lenovo’s business outlook isn’t free of uncertainties, in part because China’s economic growth is slowing. China is Lenovo’s biggest market, accounting for about 40% of its group revenue.
“The speed of China’s economic development has been affected by the global economy because exports are its major driving force,” said Lenovo Chief Financial Officer Wong Wai Ming. “I don’t think anyone can say that the world economy has already hit the bottom, but my view is that its decline is slowing down.”
Mr. Wong said that Lenovo’s business in China isn’t limited to major cities like Shanghai or Beijing—what it calls mature markets within China. In areas outside urban centers, “there’s huge demand that has not been touched,” he said.
Since last year, Lenovo has been aggressively expanding its mobile device business. The company is already the second-largest smartphone vendor in China after Samsung Electronics Co., and it also sells handsets in emerging markets, mainly in Asia. In May, the company said that its aim was to sell 50 million smartphones and 10 million tablets in its current fiscal year through next March. “We are confident that we can meet those sales targets,” said Mr. Yang.
Mr. Yang said that even traditional desktop and laptop PCs have room for growth in China, given that PC penetration is still much lower compared with developed countries. “I believe that urbanization that the Chinese government is driving will help expand the PC market,” he said.
While the global PC industry is bracing for one of its worst years in history amid weak demand, Lenovo, which acquired International Business Machines Corp.’s PC business in 2005, has continued to outperform the industry in terms of shipments for more than a year. Its net profit for the quarter through March rose 90% to $127 million, while revenue increased 4% to $7.83 billion.

Write to Juro Osawa at juro.osawa@wsj.com