China’s Lenovo is doing innovative things—But its plans to topple Apple seem farfetched

March 31, 2013
March 31, 2013

Chinese tech companies have a tendency to copy instead of innovate. Lenovo is one company that appears to break this mold.

Here, the UK’s Daily Telegraph details how Lenovo brought PC usage to the Chinese masses by coming out with hardware that translated English script into Chinese characters.

And the Chinese manufacturer has a potentially interesting model named Horizon that is about to hit the shops. The Telegraph calls it a “PC with a screen that can be flipped flat like a table, making it ideal for interactive board games.”

Lenovo’s chairman and chief executive Yuan Yuanqing clearly believes this kind of creativity is enough to unseat Apple as the world’s biggest technology company. He has what he calls a “protect and attack” strategy, where Lenovo moves to guard its position in China while also attacking Apple and Samsung’s presence in emerging and developed markets.

The Chinese company could well challenge its Cupertino rival in terms of sales. But not profits. According to its latest financial results, Lenovo has a 2.6% operating profit margin. Apple’s latest quarterly operating margin was 31.6%.

The reason for its low profitability is that, unlike Apple, Lenovo is yet to invent a must-have, premium-priced product. Signs are it will not do so soon either.

The iPad transformed working lives, people’s use of home technology and classroom learning. Lenovo’s Horizon, according to CNET, is simply a nice addition to PC technology that is unlikely to revolutionize anything much.

The Chinese company does have a massive PC business that some analysts believe is the world’s largest. Still, much of that dominance comes from aggressively undercutting rivals’ prices. And as the Economist noted in January, in most markets outside of China, Lenovo loses money.

Lenovo has chosen smartphones as the model that it believes will drive its international sales. That looks like it will be another high-volume, low-priced strategy.

Meanwhile, some apparently leaked designs of new Lenovo smartphones seem surprisingly similar to phones already sold by Taiwan’s HTC.

So to really challenge Apple in terms of what matters to shareholders—and that is always profits—Lenovo needs to think much harder.

Until it does, it remains a big-sales company that is innovative in a Chinese context, but little more.

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