Cities with a population of less than one million are beginning to see the value of PCs, especially for the purpose of education. As affordability grows, there will be higher temptation to buy a laptop.
Lenovo is the latest hardware manufacturer to enter the smart device market in India. While consumer adoption may be sparse, the move is aimed at being at the forefront of ‘all things technology’. Rahul Agarwal speaks to Venkata Susmita Biswas about learning from Motorola’s failure in India, Lenovo’s focus on the commercial market, and more. Edited excerpts:
The Indian PC market has been seeing a decline, as per IDC’s report. Do you see the market reviving?
The market has been stagnant in India for the last five years; but is better than how the market is doing globally — which is 70% of what it used to be. The stagnation is in terms of units; but in terms of value, we see the universe expanding. People are now keen on spending more money on premium laptops. Lenovo is more focussed on value rather than units.
How do you plan to drive growth for Lenovo’s PC business in this smartphone obsessed market?
There is still hope because beyond the top 52 cities and towns, PC penetration is under 20%. Cities with a population of less than one million are beginning to see the value of PCs, especially for the purpose of education. As affordability grows, there will be higher temptation to buy a laptop. That’s a huge market with a high potential that we can tap if we play the game right; for example, by having an operating system in the local language.
In addition, we cracked the Tamil Nadu government deal late last year under which we will supply 1.5 million laptops to the state government. The commercial and consumer segments have equal share in terms of units sold. That said, in terms of value, the commercial segment brings in 60% of sales, whereas the share of consumer segment is 40%. Our consumer segment market is de-growing. Having said that, Lenovo wants to be number one in the market, which means we cannot leave any segment.
What has prompted Lenovo’s pivot to IoT with devices such as smart tabs and smart clocks?
We are aiming at making products that entice the new generation of consumers. We have smart pads, smart clocks and AR/VR headsets for commercial and consumer use. We feel that we are well poised to leap into it, especially since we are the market leader in the tablet market. We will launch products like smart bulbs, smart plugs and cameras when the market attains critical mass. We want to convert our brand awareness from PCs and phones to anything that is technology.
The market is still very niche. Despite the fact that we won’t make money for the first few years, we have decided to take the leap.
Amazon and Google fully support our ventures, as they see them as opportunities to expand the whole ecosystem. We won’t invest in building our own assistant because there are others who are doing it very well. We just need to ride that wave, rather than create something new. Some device manufacturers have tried doing this, but finally there are very few companies that are able to rule the ecosystem.
What did Motorola’s failure in India teach Lenovo?
Our expense structure was high, our product transition was not fast, we were not launching the latest products, and had a few strategic misses. It is a tough market because of the large number of aggressive Chinese players. Two quarters ago, we broke even globally for the first time since we bought the company. We folded operations in a lot of countries, and are focussing on Latin America, North America, parts of Europe, India, China and Thailand.
How do you plan to regain lost market share in the smartphone market?
We have been clearing our inventory in India. It is too early to say how much market share we will gain, and how we will make the business better. We have product capability and brand recall, but we need to get our recipe right. We don’t want to be arrogant and say we will hit back at Chinese makers. We are still in an introspective mood.