Lenovo has stayed hot despite the frosty climate for Chinese tech companies. 

The world’s top personal computer (PC) seller has largely escaped the high-profile crackdowns that have marred the outlook for other high-profile Chinese firms such as Huawei and Hikvision. Lenovo has, in fact, benefited from the surging PC market during the pandemic, with its annual revenue reaching a record $60.7 billion last year. 

Lenovo’s ability to fly under the radar, even as U.S.-China tensions worsen, may be down to politicians and regulators seeing it as posing little threat in areas such as intelligence gathering and cybersecurity. 

Meanwhile, Lenovo’s parent Legend Holdings has remained active, partly through its two investment firms, Hony Capital and Legend Capital, both based in Beijing. Each has been in operation for nearly two decades, investing domestically and overseas in industries as far-flung as Australian seafood and Israeli online casino games. 

This week, The Wire looks at Lenovo’s global presence, its parent company’s reach, and its history since its groundbreaking 2005 acquisition of IBM’s PC business. 

Lenovo’s Climb

That $1.25 billion IBM purchase was a defining move for Lenovo into the global marketplace. The deal — completed when U.S.-China relations were less tense than today — has allowed the Chinese firm to use the ThinkPad brand on its products ever since. 

The “secret” to Lenovo’s success isn’t overly complex, according to industry analysts. It offers fairly inexpensive but dependable products, designed for a range of uses such as work or gaming. Over the years, though, Lenovo has expanded into adjacent sectors as the demand for PCs dipped, particularly with its multi-billion dollar acquisitions of phone maker Motorola and IBM’s “low-end” servers in 2014. Even so, its PC sales still account for three-quarters of its yearly revenues. 

A Lenovo spokesperson attributed the company’s success to its alignment with trends such as consumers’ increased PC demand during the pandemic, infrastructure upgrades, and the rollout of artificial intelligence-driven products.

“Lenovo’s proven track record for execution, its global/local operating model, and new organizational structure align to these trends, further strengthening our confidence in the sustainability of our results and our ability to drive long-term, sustainable growth,” Jeff Shafer, Lenovo’s Vice President for Global Corporate Communications, wrote in an email to The Wire.

In smartphones Lenovo was briefly the world’s third-largest smartphone seller in 2014 following its Motorola purchase. The brand has had some success in Latin America and, to some extent, in the U.S., but has been far less successful than Lenovo’s PC business. “Globally, it hasn’t done quite as well as a lot of us hoped when Lenovo bought the brand,” says Jitesh Ubrani, a research manager for the worldwide mobile device tracker at International Data Corporation (IDC). “Many analysts, and the industry as a whole, expected Lenovo to do with Motorola what they did with [IBM’s] ThinkPad.” 

Lenovo has evaded the same level of scrutiny faced by other top Chinese tech firms that have expanded into the West. Experts say that’s largely because its PC business is not involved with critical infrastructure, like Huawei or ZTE’s.

“If I’m concerned about the security implications of buying a Lenovo I can buy a different computer and that decision doesn’t have huge security implications for the rest of the community,” Tom Uren, a Senior Analyst at ASPI specializing in Cybersecurity, Internet Economy & Strategy, tells The Wire. “The same underlying reasoning that applies to Huawei or ZTE (that the PRC government could compel them to act as extensions of the Chinese state) essentially could apply to any Chinese company, but Lenovo is far less critical to the telecommunications supply chain.”

The U.S., and the Americas more broadly, have in fact become an ever more important market for Lenovo, even though it lagged behind HP and Dell last year. Whereas China represented nearly half of Lenovo’s sales as recently as 2013, it now accounts for just under a quarter, with the Americas region rising to occupy nearly a third. 

PCs Bounce Back

PC purchases surged in 2020 as millions of people were forced to work from home, boosting an industry that had stagnated for the last several years. With the exception of a few local success stories, the PC industry’s global leaders have been much the same for the last several years, with HP occasionally taking the lead over Lenovo.

“The pandemic has driven a lot of volume and brought back a lot of people to the PC market,” says IDC’s Ubrani. “The smartphone played a huge role in suppressing the PC market for consumers — not for businesses — and we’re now seeing that revival take place.” High sales have persisted into the first few months of 2021, with similar market shares for the leading companies, IDC has found. 

The Wide-Angle Shot

Lenovo has become part of a sprawling empire, with parent company Legend Holdings having expanded overseas both directly and through its affiliated private equity firms, which hold a combined $20 billion in assets under management.

Hony Capital has backed a few souring investments, such as the crumbling co-working company WeWork and bike-sharing company Ofo. Its limited partners include banks such as Goldman Sachs, sovereign wealth funds such as Singapore’s GIC and the U.A.E.’s Abu Dhabi Investment Authority, and Chinese state-owned enterprises such as the National Social Security Fund, China Merchants Bank, and ICBC. 

One of Hony Capital’s more elaborate relationships relates to the gaming industry. It participated in taking Chinese online gaming company Giant Network private in 2014. Two years later, Hony and Giant joined up to purchase Israeli gamemaker Playtika for billions, in a deal that also involved Jack Ma’s private equity firm Yunfeng Capital. 

See more about the range of investments that Lenovo and its related entities have made since the IBM purchase in 2005. 

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