Lenovo's struggling mobile business sets sight on high-end market

After a bruising fall from its spot as the world's third-largest mobile phone maker following its acquisition of Motorola three years ago, China's Lenovo Group Ltd is counting on a push upmarket to stop the bleeding in its smartphone business.

While the company, which vies with HP as the world's largest PC maker, returned to profit in the year to March, losses in its smartphone business worsened as marketing expenses for new products and key component costs increased.

The group's phone problems started after it acquired Motorola Mobility from Google for $2.9 billion in 2014 but struggled to integrate the assets. That, combined with fierce competition from lower-end manufacturers in its home base of China such as Xiaomi and Oppo, saw its global position fall to eighth in 2016.

A Lenovo spokeswoman said its global mobile strategy would focus on the Motorola brand, although it would continue to support its other lines, such as ZUK. "Our strategy is to prioritise mature markets ... which need brands and innovative products, whereas emerging markets need efficiency," Chairman Yang Yuanqing said of Lenovo's mobile business recently.

Mature market competition, where Yang said Lenovo's main rivals are Samsung and LG Electronics Inc, is less fierce than in emerging markets, where the low entry barrier allowed in "too many Chinese vendors, some of which compete irrationally".

Yang said Lenovo is on track to meet its goal of turning around the mobile business by the second half of the fiscal year starting in April. At the same time, some analysts say the company should cut its mobile losses in China and focus on building its strength in other markets.

Lenovo is the fourth-biggest smartphone seller in India, with a 9.5 per cent market share, which compares with Samsung in top place with 28.1, according to IDC. While it faces increasing competition from new entrants Oppo and Vivo, it enjoys good brand loyalty.