Lenovo Caught Out by Trump's on-Again Off-Again Tariffs
Arthur T Knackerbracket has processed the following story:
Chinese hardware giant Lenovo thought it had prepared for a trade war, but its plan proved insufficient once the US started to rapidly change its tax policies in imported goods.
"We are not worried about the tariff," CEO Yuanqing Yang told investors on Thursday during the company's Q4 FY24/25 earnings call. "We are worried about the uncertainty and the quick changes."
Yang explained that Lenovo manufactures its products in many countries, using a mixture of its own facilities and contract manufacturing firms. The company moves production to the optimal location to cope with customer needs and geopolitical conditions, and calls its strategy "China Plus".
The CEO told investors "no other country can replace China" as the Middle Kingdom is "the most competitive manufacturing country with low cost, high efficiency and aggregation of supply chain."
Yang said Lenovo's plans worked when the Trump administration announced universal ten percent tariffs, but not so much when the 25 percent tariff on goods from Mexico and Canada was announced in March and "implemented so suddenly that we didn't even have time to prepare.
"It had a significant impact on our performance last quarter," he said, suggesting an impact of $50 million to $60 million last quarter. He later labelled the overall impact of tariffs as "notable."
That impact didn't stop Lenovo from posting stonking quarterly results [PDF] for the financial year ended March 31, 2025.
[...] Lenovo has long hoped to build an enterprise hardware business to rival the likes of HPE or Dell. Its cloud service provider business is now a profitable $10 billion revenue concern, meaning enterprise sales were around $4.5 billion.
It will come as no surprise to readers that Lenovo attributed its enterprise hardware growth to demand for AI infrastructure, which boosted sales of its servers and liquid cooling kit.
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