The phenomenon of "cutting orders" in the electronics industry spreads from mobile phones to computers Lenovo or is affected?

Text | Jaly

The phenomenon of "cutting orders" is breaking out in many areas of the consumer electronics industry and continues to spread to the supply chain.

On April 11, it was reported that in addition to mobile phone companies, a number of PC manufacturers have also revised or plan to revise down their annual shipping targets. Recently, Morgan Stanley and other institutions have lowered the target price and shipment expectations of Hp Dell. Industry insiders expect PC sales to decline by 6% year-on-year in 2022.

On the same day, PC giant Lenovo released a report card for the first three fiscal quarters: Lenovo China's turnover and profit increased by 36% and 54% respectively, of which the PC business, which accounted for nearly 80% of total revenue, achieved high growth for four consecutive years, with a market share of 43.7%.

In the face of the spread of "cutting orders" and the agency's bearish outlook for the PC market, can the growth of PC "one brother" Lenovo continue?

PC giant shipments cut by an average of 10% to 15%?

After Apple reduced its shipment target, a Chinese Android mobile phone brand was also exposed by industry analysts, and has cut about 170 million orders this year, accounting for 20% of the original 2022 shipment plan. However, this is not the end, and now the PC industry may also face the problem of cutting orders.

According to supply chain sources, first-line PC manufacturers such as Lenovo, HP, Acer, Asus, etc., are all downgrading this year's order volume, a decline of about double digit percentage. Brand factories began to notify suppliers to revise down their annual shipping targets in the second quarter.

Some international institutions such as Morgan Stanley and Barclays have also lowered their shipment expectations for HP and Dell, and even Goldman Sachs analysts have removed Dell from the list of convinced. Research and research agency TrendForce also said that in the first half of 2022, the notebook will be under the pressure of correction, and the shipment estimate will be revised down from the original 238 million units for the whole year to 225 million units, a decrease of 8.5%. The revised outlook for 2022 shipments by notebook brands is revised downwards by about 10% to 15% on average compared with the beginning of the year.

The reporter contacted HP in this regard, and its relevant people in China said that the shipment volume of some models of PCs will be adjusted according to the market situation, and the estimated range is about 10%, but how to adjust it needs further attention.

The relevant person in charge of Lenovo's China market told the Securities Daily reporter: "The phenomenon of 'cutting orders' has indeed appeared in the PC market, but it has little impact on Lenovo. Lenovo is undergoing structural adjustment of its PC business, increasing the proportion of business models with greater market demand, and there will be no large fluctuations in price. ”

CITIC Securities said that "throughout 2022, lenovo commercial PC demand is expected to remain strong and to a large extent offset the impact of the decline in personal PC demand."

It is understood that not all PC manufacturers are facing the pressure of cutting orders, dell and Apple due to the demand in the commercial and enterprise markets remain stable, order adjustment is relatively small.

"Affected by multiple factors such as the changing international market environment and supply chain restrictions, PC manufacturers mostly have a surge in backlog inventory in the first quarter of this year, and at the same time, PCs have experienced high growth for up to 2 years under the stimulation of demand during the epidemic, the market has gradually slowed down, and it is expected that the low-end PC market will enter a downturn, but the computer demand in commercial and game segments is still in the release stage, and manufacturers with early layout and timely adjustment can still get sufficient orders and will not lower the shipment target in the short term." Lin Zhi, chief analyst of WitDisplay, told the Securities Daily reporter.

What's more than pc?

Under multiple pressures, pc giants are making a new round of adjustments in business and structure.

Due to the rapid growth of smartphones and tablets, the PC market has been in a decade-long downturn. With the growth of market demand driven by the epidemic, the PC market entered a full recovery phase in 2020 and achieved high growth for several quarters. IDC said china's PC market will grow by 10.7% in 2021.

However, the industry generally believes that the current PC market component shortage and logistics supply problems still exist, and the growth of the traditional PC market has slowed down, and even entered a recession period. According to Gartner data, global PC shipments fell 5% year-over-year in the fourth quarter of 2021, the first decline in the market after six consecutive quarters of growth. Linzhi expects that the sales volume of notebook computers in the PC market may decline by 9% in 2022.

Pc manufacturers around the world are also aware of the instability of the PC market and are undergoing a round of transformation. HP and Dell are less dependent on the PC business and are transitioning to more profitable areas such as servers and storage. Lenovo has also undergone many adjustments and determined to transform to intelligence, and China is regarded by Lenovo as the main force of its round of model change and transformation.

On April 11, Liu Jun, Executive Vice President of Lenovo Group and President of China, said that Lenovo China has entered a transition period of "technology empowering China to be intelligent" at this stage. He said that Lenovo China has developed the second curve of business growth since 2017, that is, 3S new businesses including smart products, smart infrastructure, and smart services, and transformed into solution and service providers.

Lenovo China's current business composition has also undergone major changes, although the PC is the largest but the proportion is gradually decreasing, and the scale of emerging business has increased rapidly. Liu Jun revealed that by the Q3 quarter of fiscal 2021, Lenovo China's 3S transformation new business accounted for more than 1/4 of the total revenue, an increase of 46% year-on-year. In fiscal 2022, it is expected that the revenue of 3S business will account for more than 30%.

Specifically, the turnover of its smart product SD increased by 98% year-on-year, the sales revenue of smart infrastructure SI increased by 31% year-on-year, and the revenue of smart service SS increased by 46% year-on-year.

"Lenovo China led by Liu Jun is the core area of Lenovo Group's transformation and upgrading, which is related to the success or failure of this transformation. At present, Lenovo has found a second growth curve with smart services as the core. As for the intelligent hardware business represented by PCs, it has soared a high growth rate under the background of the epidemic, and its share has repeatedly reached a new high, which has won more time for transformation. Ding, the founder of Nail Technology, said.

However, he believes that in the future, Lenovo still faces multiple challenges such as factory delays in resuming work, low employee rework rates and limited parts supply, and the change still needs to be deepened. "Lenovo's smart service business should expand to more areas to form greater performance support, the endogenous externalization of the new IT engine also needs more optimization and application landing, and its brand value has been reconstructed in the process of change and development, which has great opportunities and challenges." The slowdown in the growth of the PC market is still a trend, and Lenovo needs to accelerate the pace of transformation, especially to create smart service competitiveness outside of hardware. ”