Workers check mobile phones at a production base of Lenovo Group Ltd in Wuhan, capital of Hubei province. [Zhou Chao / For China Daily]

US unit to focus on product design as parent pins hopes on growth in markets outside of China

Lenovo Group Ltd says it is banking on its newly purchased Motorola unit to lead the group's entire smartphone business.

Chen Xudong, its senior-vice president in charge of the mobile business, said merging Lenovo's smartphone team with Motorola will allow it to win more customers in the higher-margin premium market.

Chicago-based Motorola will now be in charge of product design, with the Lenovo team mainly focused on global sales, according to Chen, who replaced the group's former head Liu Jun two months ago after smartphone sales fell short of expectations.

"We have still got a shot to win (in the smartphone market) because every player is yet to find the ingredient of success," Chen said.

Lenovo bought Motorola from Google Inc last year for $2.9 billion, and Chen's announcement marked the first significant move by the Chinese firm to integrate the business with its own units.

Allowing the Motorola team to take over handset development, however, suggests Lenovo executives are losing confidence in their own in-house design force.

Chen said the company will need to develop better-quality and prettier products to attract more customers.

Lenovo CEO Yang Yuanqing has blamed the poor performance of its smartphone unit for a profit slump in the last quarter. The Beijing-based firm saw net profit in the period ended June 30 decline 51 percent year-on-year. It said it was set to axe 3,200 workers to cut costs as a result, most of whom will be from its smartphone unit.

Nicole Peng, research director at Shanghai-based consultancy Canalys China, said the restructuring "makes sense" for what she called the "struggling Lenovo".

"But it is too early to tell if the attempt will work, because a long-list of questions still need to be answered."

Industry sources say it is likely that Rick Osterloh, Motorola's CEO, will also have a bigger say in all mobile product development.

But the Stanford alumnus is still untested in leading a Chinese development team, which is better known in cost-management than design.

Chen did not mention what role, meanwhile, Lenovo's newly revealed 'ZUK' phones will play in the overall picture. The three-month-old brand was initially launched by Chen when he was in charge of emerging businesses.

Lenovo is lagging Huawei Technologies Co Ltd in terms of shipments, and facing stronger pressure from emerging firms such as Xiaomi Corp and ZTE Corp.

Uniting Lenovo and Motorola created the world's fourth-largest smartphone maker by shipments. The company built roughly 16 million devices in the second quarter, compared with 19 million smartphone shipments a year ago, according to data from research firm Gartner Inc.

Executives have said the tie-up plans to move its focus to smartphone sales outside of China as competition becomes increasingly fierce in the world's biggest handset market.

India and other emerging markets in Southeast Asia will be the primary target for Lenovo-branded phones and Motorola devices as well as developed regions such as the United States and Europe.

gaoyuan@chinadaily.com.cn