China’s Lenovo signs long-term component‑supply deal for next year

BEIJING: Lenovo said on Thursday it has signed long-term contracts for memory chips to ensure supplies amid rising memory prices because of surging AI demand.

“We signed the optimal contract with key component suppliers to ensure we have enough supply for next year,” CEO Yang Yuanqing told Reuters after the release of Lenovo’s second-quarter results.

Global memory chip prices are climbing due to demand from data centre operators for building artificial intelligence servers. Chipmakers like Samsung Electronics have shifted capacity toward high‑bandwidth memory (HBM), used in AI chipsets, tightening the supply of less glamorous chips used in smartphones, computers and gaming devices.

China’s Xiaomi on Tuesday warned that consumers would likely see further hikes in smartphone prices next year because of the soaring costs of memory chips.

Yang said adjusting prices - raising or lowering them - is a natural way to manage cost fluctuations, without elaborating.

Overall revenue for Lenovo’s July-September quarter climbed 5% year-on-year to $20.5 billion from the same period a year earlier, beating analyst expectations of $20.3 billion, according to LSEG data.

Lenovo’s PC, tablet and smartphone business line, which accounted for over 70% of its second-quarter total revenue, reported an 11.8% revenue increase over the period.

Revenue for its digital infrastructure group, which comprises its AI server business, grew 24% although it reported a $118 million operating loss due to investment to scale up AI capabilities.

“Overall, we do not see a bubble because the next stage will be AI democratization,” Yang said, referring to the adoption of AI by industries.

The company’s adjusted net profit for shareholders grew 25% to $512 million.

Lenovo shares rose 1.97%, outperforming the Hang Seng Index’s 0.33% rise.

The stock has dropped 4.46% so far this year.