China’s phone buyers are running away from Lenovo at full speed

Photo credit: Jens Schott Knudsen.

China’s Lenovo is having a really bad time in its home market. Just a few years ago, it sold tens of millions of phones in China and was the second biggest-selling brand in the country, right behind Samsung. Lenovo CEO Yang Yuanqing said at the start of 2013 that he reckoned Lenovo could soon become number one.

But that never happened. Both Samsung and Lenovo have crashed and burned in China in the intervening years.

The latest bad news for Lenovo comes today in its new earnings report, which covers January to March. It saw shipments in China plummet 85 percent in just three months.

“China’s mobile space remained hypercompetitive,” said the company, stating the obvious. Lenovo today admitted it’s been too slow to adapt to Chinese consumers, who are trading up to ever more expensive devices now that pretty much everyone owns a smartphone already.

The average phone price in China rose to US$319 last year.

Lenovo vanished from the top five smartphone makers in China in 2015.

Lenovo has three mobile brands – its own, Motorola, and ZUK. The latter is an online-only sub-brand meant to compete with Xiaomi. Xiaomi was China’s top phone seller in 2014 by a comfortable margin. It barely held on to the crown in 2015.

But as China trades up to nicer phones, Xiaomi’s budget-conscious phones and Lenovo’s not-fancy-enough offerings are taking a battering.

Research firm Canalys says the average phone price in China rose to US$319 last year, up from US$260 in 2014. That’s been benefitting Apple and Huawei.

Lenovo is having better luck with its phones in India, where it’s the fourth best-selling brand in the country. However, it faces the prospect of suffering the same China squeeze in India in the future, as Xiaomi and homegrown Micromax entice budget-conscious shoppers while Samsung and Apple corner the middle- and upper-class markets.

After all its China struggles, Lenovo vowed to go upmarket in the Chinese phone market. “In [the rest of the world outside China], Lenovo will maintain high growth in emerging markets,” said the report. Plus, the firm will “get the US business back on track with a competitive product portfolio” for Motorola.

Lenovo’s full earnings report for the latest quarter is here.