Moving the dial

Lenovo: smartphone struggles

It would be a stretch to call Chang Cheng a titan in his sector. But the designer of a number of Lenovo’s products has enjoyed a sprinkling of stardom, thanks partly to his engaging presence on weibo. His pengci-style product reviews (referencing or poking fun at rival brands) are widely followed, so it caused a stir when he announced on December 31 that he would be leaving Lenovo after 19 years. He then took up a similar role at rival Xiaomi only two days later, provoking further debate online.

“Everything you love is very likely to be lost, but in the end love will return in a different way,” he announced rather cryptically on his weibo account.

The switch was one of the top trending topics on weibo on January 2, with the departure initially attributed to a desire to escape China’s cut-throat smartphone sector. “It was due to health reasons and the desire to spend more time with his family that he resigned,” Lenovo said in a statement, noting that Chang had “suffered tremendous pressure from running the mobile business” but would still serve as a consultant to the company.

Chang’s sudden appearance at competitor Xiaomi seemed to tell a different story and for other observers the defection was a sign of the power struggle gripping the sector. Local media source TechNode described it as “jumping ship” from Lenovo, which is verging on irrelevance in the local smartphone market, while Xiaomi girds itself for the 5G era (see WiC473).

“Chang Cheng excels in product management. But in the face of strong competition from Huawei, Xiaomi, Oppo and Vivo, which also get to take advantage of better distribution channels, there isn’t much room for him to help to turnaround Lenovo’s phone business in China,” Yan Zhanmeng, a researcher at Counterpoint, told the Beijing News.

In its heyday Lenovo was one of the top four smartphone brands in China. But with rivals offering handsets packed with advanced features, it has ceded market share despite its $2.91 billion acquisition of Motorola Mobility from Google in 2014. The US asset (not so much a trophy as the “leftovers and scraps” from the Western handset firm, critics said at the time) has not helped it to turn a profit, actually serving as a drag on Lenovo’s bottom line. The company announced the start of withdrawals from unprofitable markets last year and back at home in China it holds an insignificant share of less than 1% of handset sales.

“We did not invest much in promoting smartphones in China in 2019 as the market got really rough,” Liu Jun, Lenovo’s China president, told reporters at an earnings call in November. “The top player might be enjoying growth, but the rest, more likely than not, were losing both share and money,” he added.

Liu has a point. Although Huawei ramped up sales in China, riding on moral support from customers annoyed by sanctions against the 5G giant in the US (see WiC453), many of its local rivals were being squeezed. Huawei’s share of China’s smartphone sales grew to 40% as of the third quarter last year from 23% in the same period the year before. But Oppo’s share declined to 18% from 21%, data from Counterpoint showed, while Xiaomi suffered a bigger fall, down from 13% to 8%.

Perhaps the deteriorating performance explains why Xiaomi is scrambling to reorient itself. Aside from poaching Chang from Lenovo, it has also hired Wang Xiaoyan, founder of budget handset brand Xiaolajiao and an alumnus of ZTE, to oversee its e-commerce business. In fact 10 senior management changes have been announced since the end of November last year, including the appointment of Lu Weibing, an ex-Gionee executive, as Xiaomi’s new China boss.

Chang arrived in his new role the day after Xiaomi founder Lei Jun demanded his staff rise to the challenge of the 5G and IoT era, promising to invest Rmb50 billion ($7.2 billion) in search of “absolute victory in all smart scenarios”.

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