China’s Lenovo warns of ‘prolonged’ memory crunch, looks to AI for rebound

Lenovo Group, the world’s largest personal computer (PC) maker, warned of the “prolonged impact” of a global memory crunch after reporting a 21 per cent profit drop in the December quarter, while pinning hopes on a shift to artificial intelligence-powered devices to drive growth. “This structural imbalance between supply and demand [for memory chips] is not simply a short-term fluctuation,” Yang Yuanqing, chairman and CEO, said on Thursday after the earnings release. “It is likely to have a prolonged impact on the industry throughout this year.” Yang described the surge in memory costs as unprecedented and persistent, adding that the prices for dynamic random-access memory doubled in the current quarter, after a 40 to 50 per cent rise in the previous quarter. The costs weighed on Lenovo’s bottom line. The Beijing-based company reported a net income of US$546 million in the three months to December 31, even as its revenue jumped 18 per cent to US$22.2 billion from US$18.8 billion in the period. Sales growth was driven by demand for AI-related businesses, spanning PCs and server infrastructure to software. This segment grew 72 per cent to account for nearly one-third of Lenovo’s overall revenue in the quarter. The high component costs could constrain consumer demand for PCs and smartphones, but the market shift to AI-powered devices would drive new growth, according to Yang. “We are still confident to deliver double-digit growth in our PC as well as infrastructure business in the next couple of quarters,” Yang said. Lenovo’s Hong Kong-listed shares fell 4.5 per cent to close at HK$9 on Thursday after the results. Device makers worldwide are grappling with the memory crunch as major chipmakers divert supply to large-capacity products for AI projects and data centres, squeezing availability of conventional memory for consumer electronics. Chief financial officer Winston Cheng said Lenovo’s scale gave it an edge over rivals. As the largest PC maker, it had leveraged bulk procurement and close ties with supply chains in China and globally to secure sufficient components, he said. Lenovo led the global PC market with a 26 per cent share in the fourth quarter, shipping 19.3 million units, according to research firm Omdia. HP followed with 21 per cent and Dell with 16 per cent.