Coronavirus Causing Lenovo ‘Delays’ And ‘Short-Term Constraints’

One of Lenovo’s largest factories is located at the center of the deadly coronavirus in Wuhan, China.

One of Lenovo’s biggest manufacturing factories -- located in the heart of the coronavirus epidemic in Wuhan, China -- remains shutdown.

“As relates to coronavirus, the business priority continues to be ensuring the health and welfare of the Lenovo workforce, continuity of manufacturing and rebuilding capacity, and assisting those working to contain the outbreak,” said Lenovo in a statement. “Like the rest of the industry, Lenovo is inevitably facing some short-term constraints and delays as the supply chain is ramped back up after the extended Chinese New Year factory closures.”

The Hong Kong-based PC and infrastructure giant expects all of the company’s China-based facilities, including in Hefei and Shenzhen, will be fully recovered by the end of next month.

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The company has taken several measures to limit the impact of the coronavirus that has caused constraints for the PC market leader. Lenovo has been increasing production in facilities outside of China, such as in America and India, in order to curb the impact.

“Lenovo will leverage its geographical balance, operational excellence and strength in managing complex supply chains across a global manufacturing footprint, and solid strategy execution in order to weather the challenges,” said the company.

There are currently over 75,000 cases of the coronavirus with the death toll climbing to around 2,100 in China, according to the World Health Organization. The majority of cases have been near the epicenter in Wuhan, and the Chinese government responded with travel restrictions and an extended Chinese Lunar New Year holiday period to attempt to contain it.

The coronavirus has had a major impact on the IT industry.

Nvidia said it expects revenues to take a $100 million hit in its first fiscal quarter 2021 due to the coronavirus. Apple says it no longer expects to achieve its latest revenue guidance due to the impact of the epidemic on iPhone production and sales in China. Last week, Mobile World Congress 2020 in Barcelona was cancelled because of concerns about the coronavirus.

Lenovo’s unveiling of the short-term impact of the coronavirus came during the release of the company’s third fiscal quarter on Thursday. Lenovo reported its software and services business is now running at a $1 billion quarterly run rate, up 41 percent year over year, while the company’s $2.26 billion gross profit represented a 10 percent increase.

Overall, the company reported total sales of $14.1 billion, representing flat growth year over year, a net income of $258 million. Lenovo’s PC and Smart Devices Group hit a record revenue high of $11.1 billion.

“Last quarter, despite the geopolitical uncertainties and industry-wide supply shortages, we delivered a record-setting performance with geographical balance, operational excellence and solid strategy execution. Both group revenue and pretax income reached all-time highs,” said Yang Yuanqing, Lenovo Chairman and CEO.