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Lenovo, LG Compete for 3rd Spot in Global Smartphone Market
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Lenovo, LG Compete for 3rd Spot in Global Smartphone Market
  • By matthew
  • February 5, 2014, 08:51
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Lenovo, which recently took over Motorola, is expected to give rise to a significant change in the global smartphone industry that has been dominated by Samsung Electronics and Apple for a while. Experts are focusing on its impact on Samsung and LG Electronics, in that both Lenovo and Motorola manufacture Android-based handsets. They advise that Korean manufacturers should enhance their product competitiveness to properly deal with the potential threat from Lenovo. 

Lenovo Chairman Yang Yuanqing suggested two goals after the US$2.91 billion acquisition on January 29 (local time). One is to increase the Lenovo and Motorola smartphone sales volume to 100 million units to rank third in the global market. The goal is regarded as a pretty realistic one in that the combined sales volume reached approximately 60 million units last year. The other is to beat Samsung Electronics and Apple in the long term to become a more dominant force than it is now.

Under the circumstances, at least some change in the dynamics in the Android alliance seems inevitable. “Lenovo’s acquisition of Motorola is likely to be a negative factor for the other Android phone makers in the short term,” said Hyundai Securities researcher Baek Jong-seok, adding, “In particular, Lenovo’s globalization strategy capitalizing on Motorola will take concrete shape in the near future in the Latin American markets, where Samsung and LG Electronics have held their ground.” He continued, “This, in turn, will affect investment in LG Electronics, one of those that are competing for the third spot.” Its stock price fell for four days in a row after the takeover.

Hyundai Research Institute senior analyst Lee Jang-kyun also mentioned that the Korean companies could be in trouble. “Above all, Lenovo is continuing its solid growth in the Chinese market, which is the largest one in the world,” he remarked. “Its rapid growth based on the huge domestic demand in the Chinese market will be lasting for a while, and the advanced technology of Motorola will boost it down the road.”

In fact, Lenovo has become the second-largest Android phone manufacturer since the acquisition, following Samsung Electronics. It posted a market share of 13.6 percent in China in the third quarter of last year. Samsung’s share was 21.6 percent during the same period. “The number one victim of the takeover is LG Electronics, but it does not mean that Samsung Electronics is out of harm’s way,” an industry insider warned, continuing, “The acquisition will make the brand image of Lenovo better so it can increase its presence in the Chinese market.”

It is said that Lenovo bought Motorola in order to turn itself into a global company not reliant upon the domestic market. According to market research firm Strategy Analytics, Lenovo sold a total of 12.2 million smartphones in Q3, 2013 and 88.5 percent of it in China. In the meantime, Motorola is still enjoying high brand awareness in parts of the global market such as Latin America. 

Industry experts are advising that the Korean companies can counter the future offensive only by coming up with better and more refined products. “They will have to become trend setters and market leaders like Apple,” Lee remarked, “To become trend setters, they have to concentrate more on technological development and marketing activities.”

Also it has been pointed out is that they need to avoid direct price competition against Chinese companies. “Innovation is the only option for survival in today’s smartphone market that has long reached the maturity stage,” the senior analyst stressed, adding, “Relocation to low-cost production bases such as Vietnam will not do the trick in the long run.”