“Science and Technology Innovation Board Daily”, May 29 (Reporter Guo Hui) Lenovo Group's production base “settled” in Saudi Arabia. Its PC and server business will also further expand into the Middle East and Africa markets, and compete with other multinational companies in emerging markets.

On the morning of today (May 29), Lenovo Group announced that it has reached a strategic cooperation framework agreement and bond subscription agreement with Alat (Enet), a technology company under the Saudi Arabian Public Investment Fund.

According to information, this strategic cooperation includes Lenovo Group building a new regional headquarters for the Middle East and African markets in Riyadh, the capital of Saudi Arabia, and building a new PC and server manufacturing base in the country to serve customers in the region.

In addition to the cooperation framework, Lenovo Group also signed a bond subscription agreement with Alat to issue $2 billion (equivalent to RMB 14.5 billion) of zero-interest convertible bonds to Alat. Convertible bonds account for approximately 12.09% of the current number of shares issued by Lenovo Group when converted to the preliminary exchange price of HK$10.42 per share.

Yang Yuanqing, Chairman and CEO of Lenovo Group, said that through this strategic partnership, the company will have more resources and greater financial flexibility, further accelerate transformation and expand its business, and seize huge growth opportunities in the Middle East and Africa.

The Lenovo Group operates in more than 180 markets around the world, with overseas markets accounting for a large share of its business. The Middle East and Africa are emerging incremental markets in recent years, and deepening their layout is of great significance to the Lenovo Group.

According to information, Lenovo Group's revenue in the Chinese market in the last fiscal year was 12.578 billion US dollars, accounting for 22.12%, while overseas regions accounted for more than 70% of revenue, and the Europe-China-Middle East-Africa region accounted for 25.75% of revenue.

In the Europe-Middle East-Africa market, Lenovo Group's revenue for the last fiscal year fell 5% year over year. However, the region also showed the earliest signs of recovery in the global market. In the last quarter of the previous fiscal year, North America and Europe, China, the Middle East, and Africa also became the driving force for Lenovo Group's growth; at the same time, its smartphone business in the fourth quarter of last year also benefited from recovery in North America, Europe, Middle East, Africa, and Asia.

According to IDC's report, Lenovo's share of the global PC market in the fourth quarter of fiscal year 2023 was close to 30%.

Localized product manufacturing and industrial layout were important ways for Lenovo Group to go overseas and develop its business in the past. This time, the company's PC and server manufacturing base has landed in the Middle East, which is viewed by the outside world as a repetition of the group's past cases.

In an interview with the media recently, Yang Yuanqing said that Lenovo Group's business in the five regions of China, Asia Pacific, Europe, Middle East and Africa, and North America and Latin America is very balanced, and is inseparable from Lenovo's many years of global efforts. At the same time, the diversification of its own business has also had a great impact on the balanced layout.

“Although mainly produced domestically, we also produce in Mexico, India, Vietnam, etc., to maintain better resilience, be close to customers, and meet the requirements and compliance of different regional markets.” According to Yang Yuanqing, taking the Latin American market as an example, it was difficult for multinational companies to do it in the past. If they only did a small business, due to high tariff barriers, they would not be competitive if they did not produce locally. Furthermore, “diversified businesses use both PCs and mobile phones and servers, making it easier to establish advantages and form barriers.”

However, as far as the Middle East market is concerned, Lenovo entered the Middle East PC market relatively late, so it may face fierce competition from other early entrants from multinational brands; at the same time, in the server business, it will also face challenges from core competitors such as IBM in the Middle East.

Take IBM as an example. Its layout in the Middle East has been moving frequently in recent years. For example, in Saudi Arabia in 2022, IBM joined forces with Saudi Aramco to establish an innovation center focusing on the use of new technologies such as hybrid cloud, artificial intelligence, and quantum computing to achieve the goals of circular economy, materials science, supply chain, sustainable development, security, and digitalization. At the same time, IBM announced plans to invest 250 million US dollars this year to build IBM's first software lab in the MENA region (Middle East and North Africa).

Yuan Shuai, Deputy Secretary General of the Zhongguancun Internet of Things Industry Alliance, told the “Science and Technology Innovation Board Daily” reporter that with the development of the Middle East region's economy and the advancement of digital transformation, the demand for high-performance and high-reliability PC and server equipment by enterprises and individuals continues to increase. “By establishing a manufacturing base in the Middle East, Lenovo can further enhance the resilience and flexibility of the supply chain. However, other multinational PC brands such as HP and Dell also have a certain market share and influence in the Middle East market, and are bound to compete head-on with Lenovo in the Middle East.”

According to information, Lenovo Group has about 300 employees in the Middle East and Africa. Currently, the Lenovo Group has Lenovo's largest office in the region in Dubai, UAE, with about 150 people; Lenovo has about 40 employees in Saudi Arabia.

According to IDC, the information technology and enterprise services market in the Middle East and Africa is expected to reach nearly 38 billion US dollars by 2027. Meanwhile, according to the quarterly PC device tracking report issued by IDC, PC equipment shipments in the Middle East and Africa reached 2.5 million units in the fourth quarter of 2023.