The computing power closely related to the large model has become a powerful engine for Lenovo Group to increase revenue in the future.
When ChatGPT sounded the horn of generative AI, a new world was quietly born from servers containing massive computing power.
In this era called AIGC, traditional Al technology is experiencing a leap from perceiving and understanding the world to generating and creating the world. Multimodal content styles and fast and efficient generation speed have brought human intelligence to a new level.
However, every leap in civilization is inevitably accompanied by the further development of energy sources. Such "energy", in the AIGC era, is the huge computing power that runs endlessly in countless servers.
If the big model is the "flesh" abstracted by AI, then the massive computing power is the "blood" that maintains the operation of this flesh body.
With the rapid development of artificial intelligence technologies such as ChatGPT, as well as the emergence and application of large language models, the demand for intelligent computing power of various enterprises is also increasing.
Gartner predicts that by 2025, the global server market will exceed $132 billion, the storage device market will reach $36 billion, and the edge computing device market will reach $37 billion. The global AI server market is expected to reach $31.8 billion by 2025, with a compound annual growth rate of 19.5%.
Under this situation, whoever masters the key new "energy" of computing power will grasp the future of the AIGC era.
And this logic of mastering "key resources" and then enjoying the dividends of the times has been truly realized in the Ningde era before.
As China's largest power battery manufacturer and one of the world's largest lithium battery suppliers, CATL's stock price soared after its listing in 2020, surpassing Tesla in market value and becoming the world's largest new energy company.
The reason is that with the rapid development of new energy vehicles, people's demand for power batteries is also increasing.
CATL has seized the opportunity of this era, actively expanded production capacity, and strengthened the investment layout of the upstream and downstream industrial chain, and then became a leading enterprise in the field of new energy.
In the AIGC era, a similar history is repeating itself on another Chinese computing power giant, Lenovo Group.
01 Eat up the dividends of AI "underlying resources"
Recently, Lenovo Group (0992. HK) announced its results for the full year and fourth quarter of the 2022/23 fiscal year ended March 31, 2023: full-year revenue of RMB424 billion and net profit of RMB12.9 billion; Fourth-quarter revenue was RMB86.5 billion and net profit was RMB1.9 billion.
The good news is that the engine of diversified growth outside of PC is getting stronger: the share of non-PC revenue has increased to nearly 40% for the year.
Among the non-PC revenue, ISG Infrastructure Solutions Group increased its revenue by 37% to RMB66.8 billion, and its server, storage, software and other segments achieved rapid growth.
In the fourth fiscal quarter, when the AIGC revolution triggered the computing power arms race, Lenovo Group's ISG revenue growth was as high as 56.2%, officially ranking among the world's third largest server manufacturers.
Just as the former CATL, with its power battery system, it has a market share of 32.6% in the global market and has become a unicorn enterprise in the A-share market. Lenovo Group, which has a wide layout in the server field, has become one of the biggest pioneers in the AIGC era with its huge computing power ecosystem.
In the AIGC space, Lenovo Group ISG is able to provide the world's richest and most diverse AI-Ready product portfolio, thereby providing a rich and diverse product portfolio to the market.
For example, in its cooperation with Intel in the field of autonomous driving, Lenovo Group leveraged Intel's end-to-end technology advantages to build "vehicle-to-cloud" full-stack data analysis capabilities through in-vehicle high-performance computing, in-vehicle 5G communication platforms and data centers.
In cooperation with Intel in the field of smart healthcare, Lenovo Group cooperated with Intel to support applications such as intelligent analysis and processing of bioinformation and digitization of medical images for customers in the medical industry.
At the same time, Lenovo Group has also penetrated into the manufacturing industry of digital transformation and partnered with Microsoft and NVIDIA to create the world's first and largest Omniverse OVX digital twin platform, optimizing the overall process through computer vision, predictive maintenance, and anomaly detection on the production line.
The extensive layout of such multiple formats gives Lenovo Group the opportunity to dilute costs through scale effects and achieve sustainable ISG growth.
For the full fiscal year, ISG achieved revenue of RMB66.8 billion, a year-on-year increase of 37%, and operating profit soared by 1,363%, officially moving from the transformation domain to the performance domain, becoming one of the strong engines supporting the Group's performance growth. The server, storage, and software businesses all achieved rapid growth of 29%, 208%, and 25%, while hitting new highs in revenue.
At a time when the demand for computing power is increasingly strong, Lenovo Group ISG will give full play to the advantages of the world's largest computing power infrastructure provider to contribute to the construction of digital China.
However, such a broad and deep multi-field penetration is not a broad track that everyone can go to. To some extent, Lenovo Group, like the Ningde era of that year, has a "winner-take-all" exclusive advantage in the competition of computing power and new energy and other "underlying resources" due to its own strong technology accumulation.
02 Longitudinal capability
Specifically, this kind of exclusive advantage is created by the production capacity and technical advantages of a technology company under the wave of scientific and technological revolution.
Because the field of science and technology is different from the traditional Internet field, enterprises cannot simply use the "burning strategy" to seize the market, but more rely on solid product strength, technical skills and other "hard work" to conquer customers.
In this regard, CATL, as a leading enterprise in new energy, gives an excellent example.
In terms of technology research and development, CATL has 3,772 domestic patents and 673 overseas patents, and a total of 5,777 domestic and overseas patents are pending. CATL has also opened the mode of technology output, and reached CTP technology licensing agreements with ATL, Mobis, Arun Plus, etc., which can obtain 150 million US dollars of technology licensing revenue per year.
Similarly, Lenovo Group, which is trying to spell a path on the intelligent computing power track, focuses on AI-enabled infrastructure innovation, including AI-enabled edge computing, hybrid cloud and intelligent operation and maintenance, which has greatly enhanced its technical strength and full-stack empowerment capabilities.
Specifically, on the basis of the new IT technology architecture of "device-edge-cloud-network-intelligence", Lenovo Group has polished the "DynaSky" intelligent engine embedded in middle-platform, cloud native, and AI through endogenous and externalization, building a full-stack computing power advantage that is rare in the industry.
It builds highly scalable, portable, maintainable, and upgradeable systems that can adapt to business scenarios of different sizes and complexities to achieve rapid iteration and continuous delivery.
In the process of Lenovo Group's full-stack upgrade, it is worth mentioning Lenovo Brain, which is an enterprise-level artificial intelligence platform independently developed by Lenovo, which integrates the two core capabilities of distributed large-scale artificial intelligence model training and cloud-edge collaborative learning and reasoning, and provides more than 100 AI capabilities in 6 categories.
Lenovo Brain has been widely used in Lenovo Group's intelligent equipment, intelligent infrastructure, and a series of products and services of industry intelligence, providing intelligent solutions for manufacturing, medical, education, finance, retail and other industries.
Lenovo Group combines its more than 10 years of application experience in the field of cloud computing, continuously expands the upstream and downstream industry chain around customer needs and market changes, provides end-to-end solutions, is driven by innovation, and continuously invests in R&D and production equipment, thereby enhancing its competitiveness and irreplaceability.
If this full-stack empowerment based on intelligent computing power is the reason why Lenovo Group has been widely deployed in the "vertical" field in the AIGC era, then its powerful server technology has become a powerful engine for its deep layout in the global market in the "horizontal" manner.
03 Global "reconquest" of intelligent capital
Today, when the AIGC era has arrived, the ubiquitous intelligent network is like a "strong ship" that breaks the defense line of traditional economies, sounding the death knell of the old era of production methods.
Edge computing and cloud platforms have become the eyes and brains of the industrial Internet of Things, turning the originally complex and independent production processes into efficient and collaborative production networks, processing huge data that was difficult to calculate by the human brain in the past.
In the face of this emerging and powerful productivity, any country and region, if it wants not to be "squeezed" by these evolving intelligence, can only choose to follow the steps of the pioneers, actively embrace the big model, and embrace AI.
From this point of view, the essence of the AIGC era is precisely the "intelligent capital" represented by generative AI, a "reunification" or "re-conquest" of the world market.
In such "unification" or "conquest", powerful computing power has become a common demand of enterprises around the world. It is based on this judgment that Lenovo Group has carried out a grand global layout in the server field.
In such a global layout, Lenovo Group not only has strong computing power advantages, but also has refined solutions for different enterprises.
It can be said that "the shell is both big and accurate."
In terms of computing power, among the 500 high-performance computing clusters with the strongest performance in the world, Lenovo Group was shortlisted for 182 units, accounting for 32.2% of the TOP500, ranking first in the list of manufacturers for the tenth consecutive time, demonstrating its strong strength in the field of high-performance computing.
Lenovo Group uses its self-developed LiCO platform to achieve unified management and scheduling of various types of GPU servers, simplifying the process and difficulty of high-performance computing and AI training and inference.
In terms of diversified needs, Lenovo Group has the design, construction and operation and maintenance capabilities of end-to-end full-stack large-scale data centers from the underlying server, network, storage, supporting software, to energy conservation and environmental protection, wind, heat and hydropower, etc., and can provide customers with one-stop data center solutions.
At present, Lenovo Group has more than 30 production bases around the world, and after the official commissioning of the Hungarian factory in June last year, Lenovo Group's southern intelligent manufacturing base was put into operation on a large scale in May this year. Lenovo Group's intelligent manufacturing factory, which has the highest production complexity, is positioned as the "mother factory" of global intelligent manufacturing.
The advanced technology pioneered by the Southern Intelligent Manufacturing Base can form an intelligent manufacturing solution that can be replicated and promoted, and has successfully realized the empowerment of factories in Hungary and Mexico.
At the same time, Lenovo Group has a global R&D network, with more than 10,000 engineers, scientists and researchers, and has set up 12 R&D centers around the world, including China, the United States, Japan, Germany, India and other places. These R&D centers can make full use of global technical resources and talent advantages to carry out cutting-edge technological innovation and product development, and can also carry out localized product design and optimization according to the needs and characteristics of different markets.
All of this demonstrates Lenovo Group's strength and determination to lay out the global server industry.
04 AIGC era reestimating power
In summary, Lenovo Group's core value in the AIGC era is determined by its powerful computing power and server technology, as well as its strategic pattern of in-depth layout of the global computing power market.
In other words, what really determines the future market value of Lenovo Group is not its huge size, or the existing customer resources and market share, but the pearl in its hands, which symbolizes the direction of the new era - computing power.
Sam Altman, CEO of OpenAI, once said: to judge whether a technology is a trend, the most important point is whether people will often use it after the technology comes out.
Generative AI such as ChatGPT, which is becoming more and more popular, deservedly does this.
Under such prospects, the computing power closely related to the big model has become a powerful engine for Lenovo Group's future revenue increase.
It is precisely for this reason that when revaluing the value of Lenovo Group in the AIGC era, we have to take its revenue capacity in the server business as the main consideration.
According to IDC data, Lenovo Group's global AI server market size was 75.4 billion yuan in 2020. Lenovo Group's AI server business generated revenue of approximately RMB5.2 billion and net profit of approximately RMB45 million.
With the current level of revenue increase, Lenovo Group's global AI server market will reach 179.1 billion yuan in 2024. The revenue of AI server business was approximately RMB12.36 billion, and the net profit was approximately RMB109 million.
According to the market capitalization ratio of the internationally renowned cloud computing service providers AWS (Amazon Web Services) and Azure (Microsoft Cloud Computing Platform), as well as Lenovo Group's own advantages, if Lenovo is given 20 times PE in the field of computing power, Lenovo Group's expected market value will be 156 billion yuan.
Fiscal 2024 is expected to achieve pretax profit of $2.5 billion and net income of $1.2 billion.
This kind of revenue capability represents not only an extension of Lenovo Group's strength in the field of computing power in the past, but also its growth space for the popularization of intelligent scenarios in the AIGC era.