With Motorola, Lenovo Becomes The World's Third Largest Smartphone Manufacturer

Pending regulatory approval, China’s Lenovo will acquire Motorola Mobility from Google for about $US3 billion.

The deal will help Lenovo expand its already rapidly growing global handset business.

Lenovo’s smartphone business has taken off quickly. Consider these statistics:

  • The company shipped almost 14 million smartphones in the fourth quarter of 2013, according to IDC data. That’s good enough to make Lenovo the fourth-largest handset vendor in the world for the fourth quarter with a 4.9% shipments share, behind only Samsung, Apple, and fellow Chinese manufacturer Huawei.
  • The impressive quarter capped a watershed year for Lenovo’s mobile business — Lenovo shipped 45.5 million handsets during 2013 for 92% year-over-year growth. That’s faster growth than any of the other top five smartphone vendors.
  • Here’s another perspective on Lenovo’s meteoric rise in smartphones: consider that in twelve quarters since the first quarter of 2011, Lenovo’s smartphone shipments have grown an average of 150% per quarter.

Motorola’s handset business, on the other hand, has been struggling. Google has not really been able to revive it since its acquisition of Motorola closed in mid-2012.

Motorola’s smartphone business peaked at roughly 5.5 million shipments in the second quarter of 2012 and has been on a steep decline ever since.

For the first three quarters of 2013, Motorola posted massive year-over year shipments declines of over 50%.

So why is Lenovo interested in a has-been brand of hardware?

First, let’s simply look at the potential boost in shipment terms. We estimate Motorola shipped about 2.2 million handsets in the fourth quarter, accounting for about 24% of its annual shipments. That would bring Motorola up to 9.1 million smartphones shipped for all of 2013.

The combined handset business of Motorola and Lenovo shipped out about 16.1 million handsets in the fourth quarter, and 53.5 million in all of 2013. That would help Lenovo leap ahead of LG and Huawei into a solid third place globally with about 5.3% market share.

Click here to download the chart and data in Excel

We can pinpoint a few other reasons why Motorola would tempt Lenovo:

  • Lenovo plans to keep the Motorola brand, Chairman Yang Yuanqing told the Wall Street Journal. The strong Motorola brand will help Lenovo gain instant market share in the United States and Latin America, and Lenovo might push the Motorola brand in Asia, too. Lenovo first expanded outside China in late 2012 with a move into regional markets, including Indonesia and Vietnam.
  • Lenovo is currently the top PC maker in the world, but that’s a dubious pole position since PCs are a dying market. Lenovo is clearly keen to diversify even further than it already has. A few days ago, the company announced a restructuring plan that would split its two business divisions into four, including one division newly dedicated to mobile.
  • The deal will give Lenovo a beneficial cross-licensing agreement for access to Google’s patents. Lenovo’s CFO Wong Wai Ming said this is crucial in today’s smartphone market, where intellectual property is hotly contested.
  • Finally, let’s remember that Lenovo took a chance on IBM’s loss-leading PC business in 2004 only to then make it the third-largest PC maker in what was already an ultra-competitive PC industry. Lenovo PCs succeeded in the United States and globally. Lenovo proved able to market its brand in the U.S. There’s no reason why it can’t replicate this success with smartphones.

The smartphone market has become incredibly difficult. The industry is increasingly focused on managing costs in order to squeeze a margin from aggressively priced hardware. “The smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices,” said Google CEO Larry Page, when he explained the deal. “It’s why we believe that Motorola will be better served by Lenovo.”

When it comes to smartphones, it seems Lenovo is truly “all-in.”

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