Lenovo Layoffs: A Scenario Of Downfall In The PC Industry!

Lenovo, a global technology firm, has allegedly given the green signal to lay off certain members of the Lenovo team because the PC business suffers dramatically due to the economic slump. Levono’s employment layoffs are part of a $115 million cost-cutting effort.

In February, Lenovo CEO Yang Yuanqing announced a planned workforce adjustment for a more significant spending cut. After its fiscal year in 2022, the corporation employed around 75,000 workers. They are decreasing operating expenditures and making staff changes wherever required and appropriate. According to the company’s spokesperson, they will continue to infuse in areas that would expedite the development and the overall transformation of the organisation.

How did Lenovo’s sale affected in recent times?

The company’s revenue fell 24% year on year to $15.3 billion, with net income of $437 million, due to a “severe downturn” in the PC and smartphone industries in the quarter that ended December 31. Wong Wai Ming, CFO of Lenovo, blamed the slump on a “confluence of global economic challenges and dynamic shifts in market demand.”

According to the International Data Corporation, in the March quarter (Q1 2023), sluggish demand, surplus inventory, and a worsening macroeconomic situation resulted in global sales of PCs accounting to 56.9 million, a massive 29% reduction from the same quarter last year. According to Canalys research, Lenovo sold 79290 PCs in 2022, a 20.4% decrease from the 99,667 it sold in 2021. In addition, Lenovo’s shipments surged down in all areas except Japan, with EMEA and Latin America falling by more than 30%. 

Lenovo dominated the global PC market with a 22.4% market share, followed by HP Inc (21.1%) and Dell Technologies (16.7%). According to the research, the slowdown in growth and demand gives the supply chain some leeway to adjust as many entities begin looking for other manufacturing locations outside of China. The recovery may be slow if the recession in important markets lasts into next year.

Yang stated in February that, while Lenovo is facing the same sales downfall as competitors, he believes the PC market “may stabilise sooner than many expect.” PC sales are expected to expand faster than in 2019, when the COVID-19 pandemic sparked an extraordinary IT shopping binge and historical shortages in devices and components. While the PC market will take some time to digest the inventory to a better level, he believes overall shipments will stabilise at better as compared to the pre-pandemic level as early as the second half of 2023.

The cause of the PC industry’s collapse.

The chip crisis has impacted the sector drastically, resulting in supply chain challenges and a worsening macroeconomic climate. Higher PC inventory levels began accumulating in the first half of 2022, becoming a bottleneck for the PC market. Due to strong demand and supply chain interruptions, limited PC supply until 2021 suddenly converted into an abundance of supply after demand swiftly and drastically reduced.

Over the last 11 years, the PC industry has witnessed unique ups and downs. Following the exceptional spike phase caused by the epidemic between 2020 and 2021, the market has seen a declining trend that will last until the beginning of 2024.

Even though PC players gave significant discounts throughout the holiday season to reduce inventory, customers were not persuaded to save money. Because many customers already own relatively new PCs acquired during the epidemic, a lack of affordability outweighs the desire to purchase, forcing consumer PC demand to fall to its lowest level in years.

Conclusion.

A drop of this size occurs only when market demand effectively stops. Business and consumer confidence in EMEA has plummeted, resulting in a significant reduction in PC demand. In addition, as sellers focus on shifting outdated goods, a substantial rise in inventory has severely hampered sell-in chances. As a result, further layoffs in PC firms may be seen in the following months of 2023.