Lenovo: Surfing a smartphone wave

Chinese handset and computer maker Lenovo entered the Indian smartphone market with six smartphones in June this year in the wake of the huge success of selling more smartphones and tablets than computers.

In India, the company plans to use its computer customer base to leverage its foray into smartphones. Lenovo Chief Executive Officer Yang Yuanqing had recently said that though the company’s smartphone business is not yet driving its growth engine, the business has become profitable even while it is in the early stages of development.

Yuanqing has, however, noted that gross margins on smartphones are much higher than that of personal computers (PCs).

In India, the company has left no stone unturned in its aggressive foray into the smartphones business. In May this year, it appointed Sudhin Mathur as Director - Smartphones for India.

 Mathur is responsible for steering the company's growth in smartphones in India. In an interview with Shayan Ghosh of Deccan Herald, Mathur notes that the smartphone boom in China and India cannot be compared as in China the handsets are heavily subsidised by telecom operators.

With China accounting for 80 per cent of your company's sales, how do you think will India add to that?

We entered the Chinese smartphone market only about two years ago, and in a very short duration have seen tremendous growth. This is also because China is a mature market. Over the last two years in China, we have reached the number two position in smartphones, with market share of 14.7 per cent. India as a market for smartphones has huge potential, and we do see it growing in leaps and bounds over the next four to five years.

How do you plan to use your base of computer buyers to market your smartphones?

With our strong retail network of 1,200 Lenovo Exclusive Stores (LES) and other multi-brand stores and LFRs such as Croma, we will be able to successfully reach out to more and more consumers across the country, including the Tier 2 markets. Retail is a strong focus for Lenovo, providing a look-and-feel experience for consumers in India.

In addition, we will leverage social media platforms to clearly communicate Lenovo’s focus on the PC+ market and our role as a prominent player in the smart connected devices segment.

Don't you think with the mobile market in India getting saturated, and this is a late entry for Lenovo?

The saturation is in the case of feature phones and not in the smartphone market. In fact, the smartphone market has just started booming in India and is still in the nascent stage. According to IDC, India is set to become the third largest smartphone market by 2017, after China and the US, and is expected to grow at a 57.5 per cent CAGR in the period of 2011-16.

In 2012, we saw 14 million smartphones sold in India and have seen the same number of smartphones sold already in the first half of 2013. The market is expected to more than double over the next four to five years.

Overall, the smartphone market constitutes 10 per cent of India’s total handset market, where we expect feature phone users to migrate to smartphones eventually. As a brand, Lenovo is already established in the market and we will be looking to leverage this for our smartphone business.
 
With Lenovo selling more smartphones and tablets than computers, can it be said that the company is even more aggressively pushing smartphones now?

Lenovo as a brand is focused on PC+ transformation, and has thus created the Mobile Internet Devices Home (MIDH) division to provide greater focus to all the form factors.
There is the strong focus on smartphones, which will stay. In fact, we are aggressive about all the form factors — smartphones, tablets and convertibles — all of which are a part of our PC+ strategy.

It is a strategy that will work for us, going by the results so far. According to IDC, Lenovo is the number three player worldwide in smart connected devices (desktop PCs, portable PCs, tablets, and smartphones) with a market share of 6.5 per cent.

Is the recent price cut on the K900 from 32,900 to 25,990 aimed at targeting more volumes out of India?

The prices offered online are more by dealers and e-commerce players. Our effort has been to provide consumers with the best value at the MOP of Rs 28,999.

What are you doing to distribute your smartphones in the smaller and Tier 2 cities?

Our focus for now is on top 69 cities where the potential for smartphones is huge. Over a period of a year, we will move into the smaller cities — Tier 3 and Tier 4.

However, we already have a presence in some of the smaller markets through our LES Lite stores, the smaller versions of our exclusive stores in Tier 2 cities. A few of these smaller markets include Guntoor, Nellore, Solan, and Jalgaon.

Do you think the smartphone boom will happen on similar lines as that of China where the market was only 10 per cent of the total mobile phones a mere two years ago?

We might not see the smartphone boom in India happening at the same pace as in China. This is primarily due to the subsidising of handset prices by Chinese telecom carriers. However, there is enormous potential for smartphones in India. We will see the market expand and also expect a shift from feature phone usage to smartphone usage.