Josh Ye

HONG KONG (Reuters – China’s Lenovo Group warned Thursday that shipments could fall soon as China’s COVID-19 Lockdowns exacerbated microchip shortages. After posting the slowest quarterly growth in seven quarters, it had posted the lowest quarterly growth since 2007.

The largest manufacturer of personal computers in the world is one of the many businesses facing supply chain challenges. These include a long-term shortage of chips, disruptions due to the Russia/Ukraine war and China’s attempts to end the spread of COVID.

“Due the macro economic headwinds,” the shortage is weighing heavily in the very short-term, Luca Rossi of Lenovo executive vice president, said on a post earnings call.

“In particular, in this quarter,” the shutdowns in manufacturing will have an impact on total shipments almost everywhere, especially in China’s People’s Republic of China,” said he, noting that inflationary pressure and geopolitical tensions are also curtailing demand.

Wai Ming Wong, Lenovo’s chief financial officer said that the quarter saw a disruption in Shenzhen’s factory operations. South China’s city put a temporary lockdown on March 1st and then conducted several rounds of testing following a rise in COVID case.

While the company acknowledged that it is seeing some relief in supply shortfalls in the PC segment of its business, they said their smartphone and data centre businesses remain under severe pressure.

According to Counterpoint data, Beijing’s company was a key player in the PC market. It had a 23.1% market share during the January-March period.

In the December quarter, Lenovo saw record-breaking sales and profits as people bought PCs in a rush to get work done at home. However, sales are starting to slow down as China has become the biggest market for the company. The Omicron variant keeps consumers in their homes and closes factories.

Refinitiv reported that the company’s quarterly revenue increased to $16.69billion from $15.63billion a year ago. This is below an average estimate from nine analysts of $17.36billion. This was 6.8% of the company’s highest annual growth rate in seven quarters.

However, shareholders saw a rise in profit to the tune of $412 million. This was higher than analysts expected.

Lenovo also announced its March fiscal year results. The company’s revenue rose 18%, to $71.6 billion. Profit soared 72% to $2 Billion. These are the highest figures for either since 1994 when it went public.

Counterpoint revealed in April that worldwide PC shipments dropped 4.3% in Q1 2022. The drop was caused by the instability of supply chains already in place and a shortage of components.