The story of how a Chinese company became the world leader in the production of computers, but failed to achieve success in the smartphone market, even with the help of Motorola.
We continue to get acquainted with large Chinese companies. Now let's look at the history of the company Lenovo, which became the world's largest laptop manufacturer and is now engaged in the production of smartphones under the Moto brand.
Before that, I advise you to read the history of LeEco, Xiaomi, Meizu and OnePlus.
In 1984, Chinese engineer Liu Chuanzhi founded New Technology Development Company with 10 members of the Institute of Computer Science from the Chinese Academy of Sciences. In the first phase, they started importing TVs, electronic watches, roller skates and other goods into China, but the business quickly failed.
It should be understood that none of the team members had any business experience – this is a group of scientists and engineers. Lack of experience and complete misunderstanding of the market became a problem that Liu Chunzhi recognized in the future. The Chinese Academy of Sciences provided seed capital for the fledgling company, so they had the opportunity to try new development paths. The investment amounted to 200 thousand yuan, then it was about 25 thousand US dollars.
After the first unsuccessful attempt, they had to change the business profile – the company started checking the quality of computers before selling them in Chinese stores. In parallel, they spent money and energy on developing a printed circuit board that would allow IBM – compatible computers to work with Chinese characters. It was released already in 1986.
Legend Chinese Character Card PCB
The development of their own board was the first achievement in the history of the company, and in 1988 they received the main award of the China National Science and Technology Progress Award for it.
Also in 1988, the company changed its name from New Technology Development Company to the simpler Legend Hong Kong, but for convenience I will just write 'Legend'.
Capturing the computer market
In the 1990s, Legend did an incredible job. It all started with the announcement of the first Legend 286 branded computer for the home market. At the same time, the Chinese government canceled the quota system and lowered taxes on imported computers, which helped large foreign companies to operate more freely in this market.
Legend 286 is the first computer designed and manufactured in China
In parallel with the development and production of branded computers, Legend started distributing devices from HP and Toshiba. It is now unclear whether this was planned or so coincidentally, but the distribution business allowed the company to create the first large logistics network in China – this will be useful for distributing Legend branded computers.
In 1993, Legend introduced its first computer based on the Pentium processor from Intel, and two years later, the first off-the-shelf server appeared.
In 1994, Legend was listed on the Hong Kong Stock Exchange. The team raised $ 30 million in investment, but the Chinese Academy of Sciences remained the main investor. For China, this was the first example of a small company entering the stock market and raising money, as has happened many times in the West.
In the Chinese market, Legend competed with major foreign brands – IBM, HP, Dell, Compaq and others. It took her only seven years to take the first place in the market share of computers in China since the release of the first computer. I will give a small table:
Data from Handbook of East Asian Entrepreneurship. Percentage indicates market share
It is still unclear what caused the Legend to be so successful in the computer market. Perhaps an important role was played by the fact that this is a completely new market and foreign companies have just got the opportunity to work comfortably on it, so they have not yet had time to gain a foothold in it. Or the company's connection with the Chinese government, which, although not directly, is a co-owner of the company, helped.
Another important event in 1998 – Legend released its millionth computer. It was given to Andrew Grove, the co-founder Intel who pulled the company out of a massive crisis in the 90s. The computer is now in the museum Intel.
By the end of the 90s, Legend had acquired the status of the largest computer manufacturer and supplier among all countries in the Asia-Pacific region. She failed to conquer only the Japanese market, where local brands have strengthened.
Entering the world market
Legend has prepared thoroughly for the new millennium. The year before, she introduced the first fully Internet-ready computer. Then, already about a million Chinese had easy access to the global network.
At this stage, the main company, Legend Holdings, divided the business of manufacturing computers (Legend) and importing PCs, laptops and printers (Digital China) into separate divisions. In 2003, the company announced its readiness to enter foreign markets; for this, the Legend division was renamed Lenovo – the company we know now.
All this time Lenovo continued to occupy the main share of the computer market in China.
The most important event in the history of the division Lenovo took place on December 8, 2004 – the company announced the purchase of the computer business IBM along with the ThinkPad brand. The company received a ready and well-established business for the production and supply of computers around the world. So Lenovo became one of the first Chinese companies to be able to operate on a large scale in the global market.
IBM ThinkPad X31
Immediately after the close of the deal to buy the business IBM, the company Lenovo became the third largest PC maker in the world, behind HP and Dell in the first two places.
Already in 2006, a completely new brand Lenovo acts as a partner for the Olympic Games in Italy. As part of the cooperation, the company supplied 5,000 stationary computers, 1,000 laptops and 350 servers.
Lenovo made a good decision after buying part of IBM – they didn't change the business. The company continued to develop its ThinkPad line of business notebooks and still retains the design of the original models. For example, modern ThinkPads still use the TrackPoint joystick on the keyboard.
Overall, the ThinkPad brand will play an important role in history Lenovo – this line of notebooks regularly receive awards for quality and reliability. This confirms the fact that ThinkPad computers have been used on the International Space Station and other spacecraft for over 20 years.
Lenovo ThinkPad R400
In April 2006, the company Lenovo signed an agreement with Microsoft to install Windows on its devices – the deal was worth $ 1 billion. At that time, computers in China were sold without an operating system, so many preferred pirated versions. At the same time Lenovo is entering the emerging markets of India and South Africa and making them an important part of the development strategy.
В 2006 году выходит книга от малоизвестного автора Линг Жиюна (Ling Zhijun) под названием 'The Lenovo Affair: The Growth of China’s Computer Giant and Its Takeover of IBM-PC' — небольшой рассказ about the history of the company from the moment of creation to the purchase of a division IBM. The book was not translated into Russian, and I could not find an electronic version on the Internet. But you can still buy a paper book in English at Amazon.
Since 2007, ThinkPad laptops began to come out with a logo Lenovo, before that they were branded IBM – these were the conditions for buying a business.
In 2008 Lenovo introduced the Idea brand – IdeaPad laptops and IdeaCentre desktops. Apparently, this line was created to participate in the middle and low price segments, while ThinkPad computers are predominantly at the above-average price level.
Netbook Lenovo Ideapad S10-3
The launch of the new brand was successful. A year later, the company reported on a million Idea devices sold. They began to be sold in China, America, India, Australia, South Africa, France, Russia and many other countries. But Lenovo was still in third place among global manufacturers.
In parallel with computers Lenovo, she was engaged in the development and sale of ordinary phones, the first appeared back in 2002. Many people don't know about this because the business was a failure and the company tries not to mention it. In 2008, the company sold its mobile phone business for $ 100 million. A year later, they saw a rapid development of the market, they decided to return the division, but already had to pay twice as much.
It took a little time to recover from the failure with the phones. In January 2010, the company Lenovo took part in the CES in Las Vegas – the first LePhone smartphone was presented at a separate event (nothing to do with LeEco). The model was produced only for the Chinese market, and outside it was of little interest to anyone.
This is a small smartphone with a 3.7-inch AMOLED display and an unusual design. The LePhone was powered by a modified Android and single-core Snapdragon processor. Of the interesting solutions, I can only mention the case with the keyboard.
And again the new business started successfully for the company. A year later, the company had more than 5 models in its assortment; the Mobile Internet Digital Home (MIDH) division was created to develop the production of smartphones, tablets and TVs with Smart TVs. For some it will be a surprise, but Lenovo really produces TVs, and there are also monitors and even a printer.
In Russia, smartphones Lenovo were learned only at the end of 2012 – M.Video received exclusive rights to sell IdeaPhone S880 and P770i models.
Low price and wide assortment allowed Lenovo in 2013 to enter the top five world leaders in smartphone manufacturers. But it should be understood that approximately 95% of smartphone sales are in the home market. In the same year, the company became the leader in the computer market, leaving behind HP and Dell.
I will pay a little attention to the company's tablets – the first on Android was the ThinkPad Tablet. It received a 10.1-inch display with a resolution of 1280 × 800 pixels and a Tegra 2 chip. In design, it is in many ways similar to laptops from the same line, and the only interesting solution was the stylus.
In 2014, there were two major deals for Lenovo. It announced the purchase from IBM of another division, the System x line of server stations. This is not so interesting for us. And a week later, they talked about plans to buy out the company Motorola Mobility from Google.
In fact, Lenovo was buying a loss-making company without patents and important employees – all this remained with Google. It may seem like a useless purchase, but it is not. Lenovo together with Motorola bought a well-known name and a potential outlet to other important countries of the world, which the little-known Chinese company has not yet managed to conquer.
If you are interested in the background and the whole context of the deal between Google, Lenovo and Motorola – read the analysis from Eldar Murtazin.
For me, the purchase Motorola was remembered not by the deal itself, but by a completely different event. The Antimonopoly Committee of Ukraine in December 2016, two years after the purchase, fined Lenovo for the acquisition of the company Motorola without the permission of the department. The fine was only 4 thousand dollars, but the case is still funny.
The first smartphones under the Moto brand after the purchase of the company were Moto X (2014), on which the influence Lenovo was not noticeable. The next smartphones Moto X Style, X Force and X Play also looked like a logical continuation of the previous generation, although there were already more questions for them. Together with new smartphones Lenovo I wanted to return smartphones Motorola to the Russian market with fanfare.
Motorola Droid Turbo 2 (Motorola Moto X Force)
In parallel with the release of smartphones Motorola, the company Lenovo continued to produce phones of the Vibe line and other models, although it is difficult to single out interesting devices among them.
A radical change in the lineup was the release of modular smartphones Moto Z, Z Force and Z Play. These were some of the most controversial smartphones of 2016, the main complaints were about the design, the rejection of the 3.5mm jack in flagships and modularity.
Motorola Moto Z
The idea of Moto Mods looks interesting, but due to the small sales of smartphones themselves, it was not possible to make them popular. There is a module with a JBL speaker, a projector, an additional camera from Hasselblad and a bunch of others. Many of them began to give away as a gift to purchase a smartphone or sell at a discount.
Together with the flagships Moto Z and Z Force at Lenovo Tech World 2016, the company presented a foldable tablet and a flexible smartphone that can be worn like a bracelet. But it was only a beautiful demonstration of the possibilities, after the presentation they were not remembered.
In February 2017 Lenovo announced that in the future it will no longer produce smartphones under the brands Motorola, Vibe and other names, only Moto will remain. At the same time Lenovo announced that smartphones Motorola are returning to the Russian market again – this event threw me into a stupor. Indeed, only recently the company held a large event in Moscow, at which the return of the legendary brand to Russia was announced after the scandalous events in the 2000s, and a little over a year later the brand is returning to the market again. A very strange move.
Three years after the deal, it is difficult to call it successful. Sales in the world and in Russia have dropped noticeably, a complete restructuring of the model line and the transition to a new name takes a long time. Gradually Lenovo introduces new models, especially many budget and mid-priced models have appeared: Moto G, Moto E, Moto C, Moto X4 and others.
On April 4, Vedomosti reported that the company Lenovo had closed its mobile division in Russia and Eastern Europe. Smartphone sales will not stop, but the Emerging Markets division will be in charge of Russia and the CIS.
Despite the setbacks in the mobile market, Lenovo is doing well in the computer market. From 2013 to 2016, the company held the leading position, and only 2017 ended in second place for it, swapping places with HP. Although the difference in market share is still small.
Alas, Lenovo has become a company in one direction – computers. All other areas are either unprofitable or do not make as much money as the production and sale of laptops and desktops.
The company Lenovo does not have a charismatic and well-known leader, at least the name of Yang Yuanqing, who has served as CEO since 2009, will hardly tell you anything. Therefore, I did not focus on the manual. It is also difficult to recall interesting models of smartphones among the company's assortment – these are average devices, of which a huge number have appeared since 2010. But the company has a whole group of fans of ThinkPad notebooks and, judging by the reviews, the company continues to keep the brand.
I suggest in the comments to tell about your attitude towards the company Lenovo and share your experience with their devices.