Lenovo Posts Record Sales, Warns Supply Chain Issues To Slow Shipments

The PC behemoth locked down revenue records for its most recent fiscal year, but executives say shipments will slow down after factories in China were hit with COVID-19 lockdowns.

Despite a strong fiscal year for global PC leader Lenovo, the company says shipments would slow in the short term as China’s COVID-19 lockdowns in March and April wreaked havoc on an already hobbled supply chain.

“Due to macroeconomic headwinds, the shortage is weighing significantly in the short term,” Lenovo Group executive vice president Luca Rossi told analysts and media during a post-earnings call Thursday. “Specifically in this quarter, the manufacturing shutdowns will impact the total shipments in basically everywhere, particularly in the People’s Republic of China.”

Still, even with economic headwinds bearing down on the tech industry, Lenovo continued its stretch of record-breaking financial results. The Hong Kong-based tech giant netted income of $2 billion for its most recent fiscal year — which ended March 31 — up 72 percent from the same period the year before, with revenue growing by $10 billion for the second year in a row to over $71 billion.

While still profitable, the company’s quarterly shipment growth slowed in the quarter ended March 31, dropping year over year by 9.2 percent, according to research firm IDC. The PC market overall showed a cooldown, specifically in the consumer PC market with global shipments falling by 5.1 percent after two years of record-breaking PC sales. Apple Inc. last month said it would take as much as an $8 billion hit after getting slammed by supply chain woes because of China’s COVID-19 lockdowns.

Harry Zarek, president of Richmond Hill, Ontario-based Compugen, called Lenovo’s results “impressive” but said it’s time for change in the industry. “The industry is being held back by both macroeconomic and political issues in addition to tech industry challenges. We are in a unique period when demand continues to be healthy yet we are still plagued by supply chain issues. This will continue to be an issue for the foreseeable future. (Supply chain issues) are happening at an ecosystem level which means our industry will need to change its operating model. Resiliency and diversity of supply are two critical areas that need to be dealt with.”

Zarek pointed to Intel’s plan to bolster its manufacturing presence in the U.S. and Europe as a way to mitigate supply chain issues in the future.

Among the top performers for Lenovo was its IT services group, SSG, which promotes digital workplace services to capitalize on continued demand for hybrid work solutions. Revenue for SSG boomed for the last fiscal year, up 30 percent to an all-time high revenue of $5.4 billion. The Infrastructure Solutions Group (ISG) targeted data center business, hauling in record revenue of $7 billion, up 13 percent year-on-year. The Intelligent Devices Group (IDG) focused on smart devices to handle the hybrid work boom, saw an 18 percent year-on-year revenue jump with more than $60 billion.

The company also released its fourth quarter earnings, showing net income improvement of more than 50 percent year on year and revenue growing 7 percent year-on-year to $16.7 billion.