May 26, 2022 – Lenovo , a leading enterprise in China’s digital economy The Group (HKSE: 992) (ADR: LNVGY) announced the 2021/22 full year (April 2021-March 2022) and fourth quarter results: the annual turnover is nearly 460 billion yuan, an increase of 18% year-on-year, The annual net profit exceeded the 10 billion mark for the first time, reaching 13 billion yuan, a year-on-year increase of 72%. Completed on Motorola Mobility since 2014 and IBM For the first time since the acquisition of x86 servers, Lenovo Group has achieved profitability across the board in its main business.
The record-breaking performance confirmed the forward-looking nature of Lenovo’s transformation strategy. The transformation leading SSG solution service business group achieved high profit and high growth hand in hand, with an annual turnover of 34.92 billion yuan, a year-on-year increase of 30%, and an operating profit of 7.67 billion yuan, a year-on-year increase of 40%.
New growth engines have emerged: ISG’s infrastructure solutions business group achieved full-year profit for the first time, with a turnover of RMB 45.82 billion, a year-on-year increase of more than 13%, and an operating profit of RMB 43 million; the mobile business’s full-year turnover reached RMB 50.7 billion , the year-on-year growth rate reached 39%, which was higher than the market trend and the operating profit reached 2.3 billion yuan, a year-on-year increase of 110%, creating the highest since the Motorola merger.
In terms of the main PC business, Lenovo Group continued to be the champion of the global share of the personal computer business, maintaining its advantages and achieving solid performance. High-end segmented products have grown rapidly, with game categories up 37%, high-end YOGA up 30%, and workstation categories up 60%.
Throughout FY21/22, Lenovo faced different challenges than before: repeated outbreaks, intensified geopolitical conflicts and unprecedented supply shortages. The triple challenge was superimposed in the fourth fiscal quarter, and the Group’s operations faced a major test. Despite this, the group achieved growth in the quarter: turnover reached 106 billion yuan, a year-on-year increase of 7%; fourth-quarter net profit reached 2.6 billion yuan, an increase of more than 50% year-on-year for seven consecutive quarters.
“Infrastructure solutions and mobile business have entered the harvest period, not only began to contribute profits, but also become the company’s new growth engine together with the solution service business. We will seize this window period and make every effort to promote the company’s overall growth.” Lenovo Yang Yuanqing, chairman and CEO of the group, said. “With a clear strategy and strong execution, with a unique competitive model of ‘global resources, local delivery’, and with a balance of innovation and efficiency, we will remain nimble and resilient to better seize opportunities, manage risks, and deliver sustainable growth and Commitment to continuous improvement in profitability. “
Looking forward to the future, Lenovo Group is unswerving in its service-oriented transformation, and its determination to strengthen R&D innovation remains unchanged: last fiscal year, the company’s R&D investment increased by 43% year-on-year, reaching 13 billion yuan, and completed the recruitment of nearly 5,000 R&D talents. Yang Yuanqing said: “We are moving towards the goal of doubling our R&D investment within three years, further enhancing our core competitiveness and promoting sustainable and profitable growth.”
Fiscal Quarter Results Highlights
Annual turnover of nearly 460 billion yuan, an increase of 18% year-on-year
The three main businesses are profitable across the board, with a net profit of RMB 13 billion
Fourth-quarter net profit reached RMB 2.6 billion, an increase of over 50% year-on-year for the seventh consecutive quarter
The annual R&D investment reached 13 billion yuan, a year-on-year increase of 43%
SSG’s annual turnover was 34.92 billion yuan, a year-on-year increase of 30%
ISG’s annual turnover was 45.82 billion yuan, a year-on-year increase of 13%
IDG’s annual turnover is nearly 400 billion yuan, an increase of 18% year-on-year
In the post-epidemic era, the trillion-dollar global IT service market continues to expand. Worldwide IT and business services revenue is expected to grow 5.6% in 2022, according to IDC research, a 160 basis point upward revision from last October’s forecast. In the next few years, the global IT and business services market will continue to expand at a rate of 4-5%, and the education and retail vertical market will become the fastest growing vertical market with a double-digit compound growth rate by 2024. Government and manufacturing to It will become the largest vertical market in 2024; research shows that flexible working models, including working from home, are becoming mainstream. Taking the Asia-Pacific region as an example, more than 56% of the surveyed employees hope to continue working flexibly after the epidemic is over, and more than 70% % of employees say flexible working has no impact on productivity. The business size of digital workplace services is expected to reach $93 billion by 2025, indicating a huge business opportunity to provide turnkey solutions beyond DaaS under an “as-a-service” model. At the same time, the new model of “everything is a service” has been welcomed by more and more CIOs, and more than 90% of CIOs are willing to consider adopting this model.
The “14th Five-Year Plan for Digital Economy Development” issued by the State Council at the beginning of this year proposed core contents such as independent technology, information infrastructure, industrial digitization and digital industrialization, data security and governance. SSG leverages the advantages of the new IT technology structure, integrates Lenovo’s full-stack service capabilities, and helps all walks of life to transform and upgrade intelligently.
In the last fiscal year, the SSG solution service business group achieved high growth at the same time of high profit, and the turnover reached a historical record of 34.92 billion yuan, a year-on-year increase of 30%. Operating profit was 7.67 billion yuan, a year-on-year increase of 40%, and operating profit margin reached 22%. All business segments achieved strong growth.
Compared with traditional hardware support services, operation and maintenance services and more in-depth industry solutions have grown faster. The turnover of operation and maintenance services increased by 63% year-on-year. TruScale’s “everything as a service” growth momentum is particularly rapid. The turnover of operation and maintenance services and project and solution services has accounted for nearly half of SSG’s overall business. At the same time, SSG continues to invest in software tools, platforms and reusable vertical industry solutions with proprietary intellectual property rights, focusing on vertical areas such as smart manufacturing, smart retail, smart healthcare and smart cities. TruScale’s “everything-as-a-service” product portfolio has also expanded into the field of digital solutions for the workplace, while also developing hybrid cloud solutions. In the latest metaverse field, Lenovo Group is also exploring solutions using the basic capabilities it has accumulated.
Going forward, SSG will continue to invest in software tools, platforms, and replicable vertical solutions with its own IP, expand the TruScale product portfolio into broader digital workplace (DWS) solutions, develop hybrid clouds, and further explore Metaverse solutions , ultimately focusing on growth and expanding profitability.
As a key business of Lenovo’s service-oriented transformation, SSG’s business revenue target for the new fiscal year is to maintain a rapid growth rate of 30%, while maintaining a business growth rate higher than that of the group’s overall business, becoming the group’s revenue and profit growth engine . At the same time, SSG will also fully assist the Group to integrate and empower the full-stack service capabilities brought by the new IT to customers and society.
The report “China’s Overall Cloud Computing Market Forecast, 2021-2025” released by IDC shows that in just 15 years by 2021, the global overall cloud computing market scale has grown from zero to a huge market of 705 billion US dollars, and is entering a period of accelerated growth. In the first stage, by 2025, the global overall cloud computing market size will exceed 1.3 trillion US dollars; Gartner’s research shows that the global IT budget will reach 4.5 trillion US dollars in 2022. Cloud computing plays a growing role in shaping the IT industry, and even dominates; IDC’s report shows that computing and storage cloud infrastructure will grow at a CAGR of 12.6% during the forecast period 2021-2026 , the scale will reach $133.7 billion in 2026, accounting for 68.6% of total computing and storage infrastructure spending. Shared cloud infrastructure will account for 72.0% of total cloud computing spending, with a CAGR of approximately 13.4%. Spending on dedicated cloud infrastructure will maintain a CAGR of 10.7%.
By 2025, the data center market will reach $183 billion, the edge computing infrastructure market will exceed $41 billion, and the hybrid cloud market will exceed $120 billion, and the total amount of data generated in a year will be two Over this year, there is huge room for growth in both data processing and storage, which will drive the continued growth of the ICT infrastructure market and bring new growth opportunities for our ISG business.
Additionally, Gartner predicts that by 2025, 75% of data will be generated outside the data center and cloud and processed at the edge. The edge computing market has broad prospects and huge growth potential. Lenovo is increasing its investment in edge computing-related fields. In the new fiscal year, it has established a new global intelligent edge business unit to integrate edge computing hardware, software, solutions and services. In the future, it will be committed to becoming an industry-leading full-stack intelligent edge Computing Solutions Maker.
In the last fiscal year, the ISG infrastructure solutions business group achieved an important milestone and achieved full-year profit for the first time, with a turnover of 45.82 billion yuan, a year-on-year increase of 13%. For the first time in the fourth quarter, it posted two consecutive quarters of profits. Higher-margin enterprise storage, software, services and high-performance computing all set revenue records. ISG China’s turnover increased by 19% year-on-year. The turnover of storage, software and services of high value-added services for the year increased by over 16% year-on-year. In the TOP500 list of global high-performance computers announced in November 2021, Lenovo Group ranked first among manufacturers with 180 finalists.
ISG China has won a number of landmark customers: Lenovo developed digital solutions for Sany Group to accelerate the construction of the “lighthouse factory”; built a green high-performance computing system for the Beijing Meteorological Bureau, providing accurate minute-level and hundreds of hours for this year’s ice and snow events Meter-level high-standard meteorological forecast; won the Gansu Zijin Cloud Data Center project in the national project “East Number and West Calculation” layout, etc.
ISG has also won several breakthrough projects: for China Merchants Bank Provide effective business guarantee; cooperate with UnionPay Cloud to jointly expand the financial industry cloud and provide financial cloud services for the majority of financial institutions; cooperate with Morgan Stanley Reached in-depth cooperation and became TruScale’s first bid-winning project; improved its independent research and development capabilities, and signed the first design project for an Internet cloud service provider; delivered the “Siyuan No. 1” high-performance computer cluster to Shanghai Jiaotong University, with a total computing power of 6 trillion times /sec (double precision), becoming the strongest high-performance computer in Chinese universities.
The newly established Intelligent Edge Division is based on Lenovo Group’s “device-edge-cloud-network-intelligence” all-element architecture, edge computing software and hardware core technology reserves, sales coverage and service coverage, and accumulation of benchmark cases. Through continuous improvement of Lenovo Intelligent Edge The panorama family of products and solutions for the business provides customers with full-stack products, an open and compatible platform, efficient and simple deployment and maintenance, and edge AI scenario empowerment, creating six edge solutions to maintain sustainable growth.
In the future, Lenovo Group will continue to drive above-market growth of ISG-related businesses by enhancing full-stack capabilities covering cloud infrastructure and enterprise IT infrastructure. Lenovo also continues to invest in capacity building for independent design and independent manufacturing, further upgrading our unique green technologies such as “Poseidon” warm water cooling technology, providing warm water cooling for all server components delivered by Lenovo, further reducing carbon emissions .
Judging from the status quo of the world’s gradual evolution to a hybrid office model, the smart device market will maintain long-term growth. In the short term, business customer demand for PCs has not been fully met due to supply shortages, and there is a clear trend that business customer demand is expanding from PC devices to scenario-based solutions. The Canalys research report believes that more than 50% of active PC devices have been in use for more than four years, and PCs will usher in a wave of updates.
At the same time, smart devices other than computers also show long-term growth potential. According to the IDC report, the global smartphone market is expected to grow at a compound annual growth rate of 2.7% from 2022 to 2025. Lenovo Group has obtained high growth opportunities with the help of dynamic changes in market share in North America and Latin America, and also seeks market expansion to bring about growth opportunities; tablet PCs have experienced high growth in the past few years, and are expected to maintain a stable high demand state of 157-165 million units in 2022-2025; Gartner predicts that IoT terminal shipments will reach 2.3 billion in 2025 Taiwan, with an average annual growth rate of 10% until 2026.
IDC research shows that scenario-based solutions will have huge market potential driven by hybrid work models. The smart collaboration market is expected to reach $86.3 billion by 2026, with a compound annual growth rate of 9.4% until 2026. Business customers adopt smart There is a growing trend towards collaboration solutions; and smart home devices are expected to reach more than 1.4 billion device shipments in 2026.
In the last fiscal year, IDG smart device business group seized the opportunity in the current market situation with many risks and achieved excellent performance. The annual turnover approached 400 billion yuan, an increase of 18% year-on-year, and the operating profit reached 30.41 billion yuan, a year-on-year increase. up 27%.
In the PC business, Lenovo continued to be the global champion of the personal computer business. The turnover of high-end segmented products such as games and high-end YOGA all achieved an increase of more than 30%, and the growth of the workstation category exceeded 60%. SMB SME business turnover increased by 28% year-on-year.
The proportion of revenue from businesses other than PC in IDG further increased, reaching 18.4% of IDG’s total revenue. While the year-on-year growth rate of the mobile business’s full-year turnover was 30 percentage points higher than the market, the operating profit reached RMB 2.3 billion, a year-on-year increase of 110%, the highest since the Motorola merger; Android tablets increased by 20.2% year-on-year, maintaining No. 2 globally; scenario-based solutions continue to show significant growth potential, with smart collaboration solutions growing near triple digits.
In the future, Lenovo will continue to improve the profitability of the PC business. Strengthen the leading edge of PC through continuous technological innovation, anchor the high-end market segment, and strive for a higher profit growth trajectory; increase R&D investment, invest in innovation, and focus on smarter equipment, core component technologies and intelligent algorithms; strengthen supply chain excellence operations , continue to deeply promote internal digitalization to improve efficiency, and strive to provide global users with products and services that meet their needs.
In business areas other than PC, the continuous increase in innovation investment will also expand the leading edge and profitability. Together with smartphones, tablets, embedded computing/Internet of Things and scenario-based solutions, PCs will transform and upgrade from providing computers to providing computing devices and solutions, creating a new growth engine.
FY21/22 was a year full of challenges and opportunities. Under the pressure of geopolitics, repeated epidemics and supply shortages, Lenovo has also seen growth opportunities brought about by the acceleration of digital transformation and the integration of the digital economy and the real economy. China’s economic structure is undergoing historic changes, from high-speed growth to high-quality growth. Lenovo’s future challenge is how to leapfrog the cycle.
In the face of repeated epidemics, Lenovo Group played a role in stabilizing growth as a leading enterprise, with a total export value of US$20.6 billion for the year, a year-on-year increase of 21.18%. At the same time, give full play to the advantages of the supply chain to drive the development of upstream and downstream enterprises. As of the fiscal year of 21/22, Lenovo’s Wuhan Industrial Base has created a cumulative industrial output value of over 320 billion yuan, and the cumulative export value is expected to exceed 35 billion US dollars. The industrial output value in the natural year of 2021 has reached a record high, with a year-on-year increase of 52%. It has become the first electronic information manufacturing enterprise in Wuhan to exceed 50 billion yuan. The annual export volume has ranked first in Hubei Province for 7 consecutive years.
Amid the supply chain disruption caused by the sudden outbreak, Lenovo’s own factory in Wuhan cooperated with the government to drive the development of the local economy with its excellent production and operation capabilities. The epidemic situation became severe in late February, and one of the main channels for Lenovo Group’s exports was cut off. After emergency coordination between Hubei Province, Wuhan City, and East Lake High-tech Zone, a cargo flight from Wuhan to New Delhi, India was opened, and each flight can transport more than 50 tons of products, driving exports. Lenovo Wuhan Industrial Base, from January to March 2022, the output value will reach 11.3 billion US dollars, an increase of 11% year-on-year, and the export value will exceed 10% year-on-year. Lianbao Technology’s annual revenue in fiscal year 2021 reached 122.7 billion yuan, and the annual total import and export volume exceeded 10 billion US dollars. It is the first 10 billion foreign trade enterprise in Anhui.
Lenovo also gives full play to the role of “chain master” to promote the implementation of upstream and downstream industry chains: Lenovo Wuhan Industrial Base, as the head enterprise of the “end” industry chain of Wuhan’s “optical core screen end network” industry cluster, drives the upstream and downstream industry chain partners The investment in Han is nearly 10 billion, and the foreign trade import and export volume driven by it exceeds 2.5 billion US dollars every year.
Not only that, Lenovo also drives the digital transformation and green development of upstream and downstream enterprises. Lianbao Technology continues to promote the development of localized industrial chain by building a 4-hour industrial circle. On the basis of building a smart supply chain, Lianbao Technology has driven more than 70 upstream and downstream suppliers to build a green intelligent manufacturing and green supply chain system.
On the other hand, through internalization and externalization, Lenovo Group empowers the industry with technological innovation and promotes the integrated development of the industrial chain. It has provided more than 100 large enterprise customers with intelligent technological transformation solutions, such as signing a strategic cooperation agreement with Dongfeng Motor. , to promote the digital transformation of the manufacturing industry; in cooperation with COMAC, the Morningstar robot independently developed by Lenovo in the development of the C919 large aircraft participated in it, greatly improving the efficiency of the production line and reducing the potential safety hazards during the spraying process.
As a result of the national policy of supporting the development of the digital economy and encouraging the transformation and upgrading of specialized, specialized, and new enterprises, Lenovo has a total of 35 “specialized, specialized, and new” companies in the supply chain, including 15 individual champions and 7 individual product champions. In the field of high-end display panels, Lenovo and industry leader JD.com Fang and Huaxing Optoelectronics have long-term cooperation and mutual support.
At the same time, Lenovo Venture Capital, a subsidiary of Lenovo Group, actively invests in the field of innovation. 39 of the invested companies have been rated as national, provincial and municipal-level specialized and special new companies, covering ten core components, ARVR, robots, and industrial software. field.
On the basis of giving full play to the advantages and experience of excellent operation and supply chain resilience, Lenovo Group has formulated a clear strategy, fully devoted to the three pillars of technological innovation, service-oriented transformation and corporate social value, and strengthened the same Lenovo and Two cornerstones of digitalization to build new growth engines.
In the field of investment and innovation, within three years, around the new IT architecture of “device-edge-cloud-network-intelligence”, the determination to increase R&D innovation remains unchanged. In the last fiscal year, R&D investment increased by 43%, and nearly 5,000 people were recruited.
Talent investment will not only promote business development and gain advantages in technological innovation, but also enhance core technologies and innovation and development capabilities in various fields of the “device-edge-cloud-network-intelligence” new IT architecture, which is conducive to the continuous improvement of the Group’s profitability and Empower all industries. At the same time, we are also deeply aware of the importance of ensuring employment in the current economic stability, and for this reason, we continue to increase the recruitment of college graduates. While enriching Lenovo’s hard-core technology talent pool, we actively undertake corporate social responsibilities.
The impact of the epidemic is short-term and external. Under the guidance of scientific epidemic prevention measures and the joint efforts of the whole society, life and production are gradually returning to normal. Yang Yuanqing said: “Lenovo will seize the perfect window for transformation to enter the harvest period, and fully promote the company’s overall growth. At the same time, it will unswervingly invest in the strengthening of innovation, in service-oriented transformation, and in the improvement of social value. , inject impetus into long-term sustainable development.”
* The dollar amount in this performance report is calculated based on the average exchange rate between the 2021/22 fiscal year and the fourth quarter, namely RMB 1 to USD 0.155820717 and RMB 1 to USD 0.157530733. This exchange rate cannot be used for any other period of time. performance report.
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