Chapter 1180 – Lenovo’s competitiveness
Gerstner and Palmisano had not noticed these figures. After reading the data, they realized IBM has no competitiveness against Lenovo. If they were to tender for jobs together, IBM would not win!
Lenovo is selling its laptop at 8,800, and IBM is selling its laptop with the same specs at 23,000. They are two times more expensive than Lenovo. Who will buy their laptops?
Of course, this is the comparison in the Chinese market. After all, China had imposed high import tariffs, and IBM was forced to raise its retail prices.
But in the US, IBM’s laptop is selling at 2,000 USD. Lenovo’s laptop with the same specs is only selling for 1,499 USD. The price difference is almost 25%. Due to the reason that Lenovo laptops are imported and have high taxes and transportation costs.
Gerstner and Palmisano calculated in their hearts. A Lenovo laptop’s production cost should be less than 1,000 USD, while IBM’s cost is over 1,200 USD. The difference between IBM and Lenovo’s production cost is quite wide.
Since Gerstner becomes the Chairman of IBM, he had lowered their production costs and even retrenched a lot of employees. In the end, they, as pioneers, lost to a latecomer from China!
No wonder <Forbes> named Lenovo Group as the fastest-growing PC manufacturer. Just cost control is the best in the world.
If it’s only because of lower labor costs, the production cost will not be so low. There must be other reasons why they can keep their cost so low. For example, the cost of the different components.
China had built the world’s biggest Crystalline silicon factory. There are plans to produce more than 50% of the world’s Crystalline silicon!
Many people laughed when they read this news. China’s Crystalline silicon technologies are below average, and this plant’s investment is not a small amount. Do they know how much Crystalline silicon they must produce to meet 50% of the world’s production?
Just nearby Japan and Taiwan can teach them a lesson.
But when many people learned that Feng Yu, Philips, and Kirilenko had invested in this plant, they realized that this might be possible.
Feng Yu had sold his Microsoft shares and has the cash to invest in this plant. Philips and Kirilenko can fund this plant too.
Philips had provided advanced Siemens technology, while Kirilenko provided Russia’s confidential technologies. Feng Yu did not ask Kirilenko how he got the technologies.
Now, the plant has no problems with its technologies.
Japanese and Taiwanese firms tried to stop Feng Yu, but it is impossible. Just China alone is a protective layer for Feng Yu’s plant and can stop those firms from entering. Who will believe that Feng Yu has no connections with China’s top government leaders?
What Feng Yu needs to worry about is to lower its cost and how to increase its efficiency. Wind and Rain Crystalline silicon factory will definitely overtake other Crystalline silicon factories with lower cost and increased efficiency.
Gerstner and Palmisano felt it might be this Crystalline silicon factory that had lowered China’s electronics components cost.
“Feng, how is the production of your Crystalline silicon factory in China?” Gerstner asked.
“It’s alright. It’s only phase one, and the factory is not completed yet.” The Crystalline silicon factory and production speed is following Feng Yu’s orders.
At its current speed, the factory can easily take over half of the global market share. When it happens, Feng Yu can control the price. If they increase its scale now, it will be a waste of money. Furthermore, it will be overproduction, and no one will buy their products.
Feng Yu must wait for a few more years for the Photovoltaic industry to rise. Solar panels will be a good product to focus on then. Feng Yu had already informed Tai Hua Battery to set up a solar panel development team and aim to grab the biggest slice of the cake!
“Feng, Liu, I have read this document. I am curious, how did you all lower your production cost? I mean, how did you all lower it to this extend?” Gerstner asked.
Liu Chuanzhi looked at Feng Yu and saw him nodding. He replied. “It’s simple. We are producing all the major components of the PC. We have agreements with all the hardware manufacturers.”
“What do you mean by producing all the major components of the PC yourself?”
“I don’t need to explain about the optical drive. IBM is also using our Wind and Rain optical technology and uses Wind and Rain – Philips standards. We are using Nvidia’s graphics card, and they have a factory in China. The price we are getting is the lowest in the industry. We are also producing the mouse and keyboard ourselves. Wind and Rain Electronics is also the industry leader for LCD monitors. They also gave us the lowest price in the industry.”
“The batteries are from Tai Hua Battery, and it is the cheapest in the industry. The hard-disk drive is jointly produced by us, Wind and Rain Electronics, Aiwa Electronics, etc., and of course, we got it at the cost price. The sound card jointly produced with Aiwa, and the sound quality is very good. It is also very cheap. The RAM is from Kingston, and they have a factory in China…”
Gerstner is speechless. All the components of Lenovo’s PC are the cheapest in the industry. Other than the motherboard, they got all other parts at the lowest price. Also, they are working with Intel and AMD to produce a cheaper High-performance notebook.
“Feng, Liu, I am very curious. Why did those hardware companies give Lenovo such good prices?” Gerstner frowned. Even IBM doesn’t get these prices.
“It’s simple. Our sales are good, and we can help them expand their market share.” Liu Chuanzhi replied.
Liu Chuanzhi knows the real reason, which is Feng Yu owns the controlling stake of those companies. With Feng Yu’s help, those companies set up factories in China, which lowered their cost and helped Lenovo Group increase their competitiveness internationally.
The higher-ups are also happy with what Feng Yu did. They praise him for not forgetting his motherland.
Feng Yu wants Lenovo Group to overtake IBM in PCs, software, and services. He wants Lenovo to be the IT industry leader. Those companies producing the parts will also be the leaders in their respective sectors!
Liu Chuanzhi knows about this plan, but he did not expect Feng Yu to act so fast and invested in all PC related companies.
As a result, Lenovo becomes so competitive in the international market. Lenovo’s PC design has been the most advanced globally, and with its current pricing advantage, its brand awareness also increases.
The difference between Lenovo and large corporations like IBM is the patented technologies. IBM and other large corporations profit a lot from their patent authorizations. This is what Lenovo is working on.
Liu Chuanzhi’s explanation did not really answer Gerstner. But this is considered the company’s secret, and it’s normal for Liu Chuanzhi not to answer.
Gerstner must negotiate the terms of this cooperation. Lenovo wants to control the PC prices?! How is this possible?!
We are IBM, and we are always the ones in charge!
