Lenovo warns of mounting PC shipments pressure due to memory chip shortage

Lenovo Group has issued a warning that the mounting pressure on PC shipments stems from a worsening memory chip shortage gripping the industry. On Thursday, the world’s largest PC manufacturer announced its third-quarter results, showing a significant 18% revenue hike to $22.2 billion, exceeding predictions of $20.6 billion.

This increase in revenue was offset by a 21% decrease in net profit, dropping to $546 million due to a hefty restructuring expense of $285 million.

CEO Yang Yuanqing emphasized that Lenovo had increased PC prices to counter rising memory costs while aggressively expanding into the burgeoning AI inference market.

“We expect PC unit sales to face pressure,” said Yang, as he told Reuters. “However, we believe our focus on growing revenue and maintaining profitability is still viable.”

Lenovo’s PC, tablet, and smartphone division generated approximately 70% of total revenue with a robust 14.3% increase in sales figures. The digital infrastructure group, which includes the company’s AI server business, saw its sales rise by 31%, though it suffered an operating loss of $11 million as Lenovo invested heavily to bolster AI capabilities.

The restructuring programme aims to refocus Lenovo on AI inference and reduce costs by up to $200 million over three years. Excluding one-off and non-cash items, adjusted net profit reached $589 million, marking a 36% increase from the previous quarter.

Lenovo’s AI server business has witnessed high double-digit revenue growth, supported by strong demand for rack-scale solutions based on Nvidia’s GB200 NVL72 architecture. Yang noted that there is a shift in AI demand towards inference from training. He added, “We expect the AI infrastructure market to quadruple by 2028.”

Recently, Lenovo unveiled new enterprise servers designed specifically for AI inference workloads, collaborating with AMD on these advancements.

This strategy underscores Lenovo’s strategic pivot toward AI technologies as it navigates through the challenges of a memory chip shortage and aims to maintain its profitability in an increasingly competitive market.