Economic review

Lenovo on blockchain bandwagon

2018-05-11 10:24:00 (Beijing Time)         Global Times

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Amid market struggles, company turns to hot technology for recovery

Once a top Chinese smartphone vendor, Lenovo is now struggling to find a solid footing in the mobile world, betting on the hotly hyped blockchain industry to reclaim its share.

This June, the company is set to unleash its flagship full-screen smartphone, which is "a beast of prey," as Lenovo's vice president Chang Cheng claimed Monday on his official Weibo account.

"Competition is just beginning," said Chang, targeting Xiaomi.

Blockchain technology will be one of the phone's key features, according to Lenovo's executives during an annual team meeting held in April.

It is not the first time Lenovo has tried out this new technology on one of its phones. A month ago, its budget device Lenovo S5, which was claimed to be the world's first blockchain-based smartphone, was unveiled by the company under a high-profile marketing campaign to compete with the likes of Xiaomi's Redmi Note 5.

Chang boasted in a statement that the S5, thanks to its encrypted payment system, can create a world where online transactions can be settled in a much safer way.

Blockchain is an open and decentralized ledger that can ensure contracts are embedded with digital codes and stored in transparent and shared databases with information that no one can delete or revise. The technology is the heart of Bitcoin and other virtual currencies, which means that in the future, a blockchain-enabled phone user may be able to mine virtual coins via their smartphone.

Blockchain is widely perceived as a world-changing technology, but that does not mean it can now turn around Lenovo's mobile business, which has been bleeding since the Chinese company purchased iconic multinational phone brand Motorola in 2014.

Taking back the limelight

A survey of web users conducted by domestic industry site zol.com.cn in April showed that nearly 40 percent of respondents intend to buy the new S5, but that the adoption of blockchain did not rank as one of the most desirable features.

Blockchain smartphones are likely to become the preserve of the tech-savvy, and may need some time to become mainstream. Given this, no other established hardware brands in China and abroad have shown any obvious intentions to weigh in yet.

Still, the adoption of blockchain, a hotly discussed topic nowadays, can be used for promotional purposes by Lenovo so as to steal some limelight away from other aggressive rivals.

Lenovo has been out of the top 10 smartphone league in China for the past two years, since rising stars such as Xiaomi, Oppo and Vivo have been gradually fighting to lead in the market, a result of their clear product positions and strong branding strategies.

According to data from US research firm Gartner, Lenovo was the No.2 Chinese company in terms of smartphone market share as of the start of 2014.

But its recent lackluster performance on the mobile front has certainly been the sore part of Lenovo's earnings. Its latest financial report showed that Lenovo Group Ltd swung to a net loss of $222 million for the nine months ending in December 2017, with revenues from its mobile business dropping 5 percent.

Lenovo will also be removed from Hong Kong's Hang Seng Index on June 4, according to the index's quarterly review. The company has plunged by nearly 60 percent since it joined the gauge in 2013.

Nevertheless, Lenovo is optimistic about bouncing back. The company had previously reached success with its popular and inexpensive line of G phones. Over 70 million Moto G series smartphones have been sold since the line launched five years ago, according to media reports. The latest Moto G model - the Moto G6 - made its debut in Brazil in April.

Furthermore, the blockchain-oriented S5, under the Lenovo brand, shows the company is recognizing it has to differentiate. Priced from 999 yuan ($156.77), the S5 is now available in China and went on its first flash sale in late March. The company did not unveil how many S5s have been sold so far, but said that the first batch sold out in two minutes.

Structure shakeup

Meanwhile, Lenovo has been shaking up its management in the mobile business.

In late March, Lenovo announced that Sergio Buniac would serve as Lenovo Mobile Business Group's co-president and Motorola's chairman and president. Prior to this, Buniac ran Lenovo's mobile business in Latin America and helped promote Motorola to become one of the best selling phone brands across the region.

In 2017, Motorola was the brand with the biggest year-on-year growth in Latin America and ranked at the No.2 position in terms of shipments in the region after Samsung, data from global market consultancy Counterpoint Technology showed.

Lenovo has also cut jobs at Motorola's unit in Chicago, where the subsidiary is based, dropping hints that it is finally pulling its forces together. Lenovo admitted in its financial reports released in 2016 that the Motorola integration fell below expectations and caused some losses.

The mobile business group in China will also be handed over to Chang, said an internal Lenovo letter. Chang was CEO of Lenovo's smartphone sub-brand Zuk, which aligns with young generations, and can help add some strength to Lenovo's campaign to get closer to rising young users. He has also been popular among tech media, especially because he is quite outspoken and has over 2 million followers on Weibo.

A fresh management team means a fresh start and new efforts in product differentiation will probably give Lenovo a good chance.