Lenovo's chip expansion a bid at differentiation

Plans to grow its mobile chip design team exponentially will help the Chinese PC maker gain better insight into optimizing its future devices, but it will not transform into a "chip giant" any time soon.
Written by Kevin Kwang, Contributor on

It is too early to say if PC giant Lenovo's purported plans of expanding its chip design team from 4 to 100 by mid-2013 will offer a significant boost for its mobile plans, but growing the team organically will not make it a "chip giant" in the foreseeable future.

Wong Teck Zhung, senior market analyst at IDC Asia-Pacific, told ZDNet Asia the vendor's push into the mobile chip design business is just another example of a device vendor looking to differentiate itself even as smartphones, particularly those running on Android operating system (OS), become more commoditized.

Citing an industry source with direct knowledge of Lenovo's recruitment of chip designers, tech news site EE Times reported in March that Lenovo, which had employed a small integrated circuit (IC) design team of 10 for the past decade, will expand the unit 10-fold to 100 engineers and focus on smartphones and tablets.

The article pointed to Samsung Electronics', which manufactures Exynos processor, refusal to supply its latest Exynos 5 Octa chip to its Chinese rival as one reason driving Lenovo's expansion into mobile chip design. The source added the Chinese PC and smartphone manufacturer will hire 40 engineers in Shenzhen and another 60 in Beijing as part of the expansion plans.

"Understanding the hardware will help Lenovo provide better software and services...optimized offerings based on the strengths of the mobile chip built into the device."

- Wong Teck Zhung, IDC Asia-Pacific

Commenting on these initiatives, Wong said by increasing its talent pool in this area, the Chinese company will have a "better handle" on the hardware aspect of smartphone design and the way it sets its devices apart from the rest on the market.

"Understanding the hardware will help Lenovo provide better software and services or, in other words, optimized offerings based on the strengths of the mobile chip built into the device," the IDC analyst explained.

He added the ultimate goal for phonemakers such as Lenovo would be to create native apps that help attract and retain consumers, and by expanding to mobile chip design, the company is "heading in the right direction".

Wong, however, played down the possibility Lenovo would set up a mobile chip design team simply because Samsung refused to supply the latest mobile processors, noting this was a "low probability" as such plans are not overnight decisions made on a whim.   

Asked if it had declined to supply Lenovo, Samsung told ZDNet Asia it "does not comment on rumors and speculations".

The South Korean electronics giant added it had "ample supply" of the new Exynos 5 Octa application processor, and the decision to use both Qualcomm's Snapdragon and its Exynos chipset for its flagship Galaxy S4 device is "unrelated" to supply chain issues.  

Lenovo, too, did not confirm or deny the EE Times report. Christopher Millward, director of global communications at Lenovo's MIDH unit, said: "In general, we do not comment on rumors or speculation."

He did say the company was very focused on growing its business, and efforts here included investing in research and development (R&D), as well as building and maintaining robust relationships with its technology partners. These were critical to Lenovo's long-term innovation and differentiation, Millward said.

Earlier, industry watchers said top phonemakers would need to have more control over the chip design and manufacturing of their business to drive up the value of their products. However, not every vendor would need or have the means to do so and strategic partnerships were sufficient to create viable, competitive offerings, they noted.

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