(Yicai Global) May 28 -- Lenovo Group’s stock price slumped after the chairman of China’s largest personal computer maker insisted it will never manufacture vehicles.

Lenovo [HKG: 0992] closed 4.4 percent lower at HKD9.35 (USD1.20), after earlier slipping as much as 5.7 percent. The broader Hang Seng Index ended little changed.

The Beijing-based company is even more resolved than Huawei Technologies not to get into the car production business, Yang Yuanqing, who is also Lenovo’s chief executive, told reporters yesterday.

Xiaomi, China’s biggest smartphone maker, e-commerce behemoth Alibaba Group Holding and search engine titan Baidu have each announced plans to enter the fast-growing electric vehicle market.

Despite that, Yang said that Lenovo’s energy and resources were limited and it needed to be on a clear track.

Although Lenovo will not produce vehicles many newly emerging carmakers are the company’s clients, said Liu Jun, executive vice president and president of the group’s China business. It provides them with wireless communication modules and in future will also supply corresponding computing modules.

Chip Shortage

On the global chip shortfall, Yang said that strong demand for PCs had caused the entire industry to face shortages in the supply chain. The ongoing shortage of PC components is putting considerable pressure on Lenovo’s supplies and determines the growth of PC sales. Yang expects the lack of chips to continue for 12 to 18 months.

Yang said part of the increase in sales of PCs was due to the Covid-19 pandemic, which has changed the way people work and study, and made people more dependent on computers and tablets.

In the past, every family had one computer, but in future the PC will become a tool that everyone will have, especially in emerging markets, Yang said.

He predicted that global PC sales will reach 330 million to 350 million this year. Lenovo’s PC business will grow by double digits at the very least in future.

IDC expects PC shipments to hit 357 million in 2021, up 18 percent from last year, and more than 11 times higher than the previous forecast of 1.6 percent. The three market segments of enterprise, education and consumer will have better-than-expected demand, it added.

Earnings

Lenovo also released its earnings results for the fourth quarter and full year yesterday. Net profit jumped 77 percent to nearly CNY8 billion (USD1.26 billion) in the 12 months ended March 31 on a 19.8 percent increase in operating revenue to CNY411.6 billion (USD64.5 billion).

Lenovo’s Intelligent Devices Group had revenue of CNY368.7 billion, up 20 percent and accounting for more than 80 percent of the group’s overall business income.

For the fourth quarter, Lenovo’s revenue reached CNY106 billion, a 48 percent leap from a year earlier and the fastest growth rate in nearly a decade. Net profit was CNY1.76 billion, six times higher than in the same period last year.

Editors: Xu Wei, Peter Thomas