Lenovo, refocusing on the Chinese domestic market, has said it will target rural customers with lower-cost computers and 700 new retail stores.
Lenovo plans more retail outlets. The move would take advantage of a government economic stimulus plan, yet to be finalized, under which rural residents can get subsidies worth 13% of the price of electronic goods purchased from participating companies.
The Beijing-based computer maker said it will sell 15 customized computer models for RMB2,500 to RMB3,500 ($365 to $510) each under the plan. The company’s regular laptop and desktop offerings range from RMB2,800 to more than RMB5,000.
‘We are prepared to offer computers to 320,000 villages, benefiting five million village households, in the next three years,’ said Xia Li, vice president of Lenovo Group.
Lenovo is refocusing on the Chinese market due to weak demand in the U.S. and Europe. It recently laid off hundreds of workers in China who supported its global operations.
The government’s subsidy program, which analysts estimate will cost the government $4.4 billion a year, is open to non-Chinese companies, so Hewlett-Packard and Dell, Lenovo’s chief rivals in China, may also participate. Lenovo believes the plan could boost PC industry sales in China by RMB10 billion, the equivalent of about 5% of the annual total.
Some analysts question whether subsidies will make much difference in rural China, where residents have an average annual income of $700 a person.
Wall Street Journal quoted Bryan Ma, analyst for IDC in Singapore as saying the program ‘theoretically could help bolster shipments,’ but isn’t likely to lead to a major shift in the market.
IDC has lowered its forecast for PC sales growth in China, as measured by shipments, to 3% for 2009, slowing from 9% growth in 2008 and 25% growth in 2007. In 2008, PC sales totaled 40.3 million units.
China – the world’s second-largest market for personal computers, measured by shipments – is Lenovo’s core market and generates more than 40% of the company’s overall revenue.
The company has maintained a strong market share lead over its competitors in China with 30.3% of PC shipments in the fourth quarter of 2008, according to IDC. H-P and Dell, with a market share of 11.2% and 9.7%, respectively, gained last year at the expense of Founder Electronics and other local rivals.
Lenovo made a push into international markets after acquiring the PC arm of International Business Machines Corp. in 2005. But it has slipped in global sales rankings and recently announced an 11% reduction in the size of its work force, not including the hundreds just let go in China, and a reshuffling of its top management.