Lenovo's acquisition of Motorola Mobility from Google, the largest ever by a Chinese tech firm, will provide it with access to key markets and the chance to challenge Samsung as the dominant Android brand. (See "Lenovo to Buy Motorola From Google?" and this Google statement confirming the agreement.)
But it also underlines how the center of gravity of the handset business is now very firmly in Asia-Pacific, and especially China.
As a result, you can now add smartphones to the list of consumer electronics products that were pioneered in the West but which are now dominated by Asian firms.
This time it's companies from South Korea and China, not Japan, that have taken the mantle.
Apple Inc. (Nasdaq: AAPL) is the only non-Asian firm in IDC's top six smartphone suppliers in the fourth quarter of 2013, commanding the number two position. Samsung Corp. tops the table, with Huawei Technologies Co. Ltd. third, followed by Lenovo Group Ltd. (Hong Kong: 992), LG Electronics Inc. (London: LGLD; Korea: 6657.KS) , and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763).
In China, the world's largest smartphone market, the iPhone is being outsold by the cheaper Coolpad, which costs less than $100, and three other local brands, reports Bloomberg. That helps explain why Apple was so keen to enter the Chinese market and increase its presence there. (See China Mobile Gets the iPhone.)
Yet even China, where consumers bought 350 million smartphones in 2013, is becoming saturated, says CK Lu, principal research analyst at Gartner Inc. .
He says the acquisition will help Lenovo to expand beyond its home market: Motorola has brand recognition in North America and Western Europe, where Lenovo is absent.
But these developed markets are declining in importance. Motorola, though, also has an 8% share in Latin America, while Lenovo is strong in countries such as India, Indonesia, and Russia. According to IDC forecasts, emerging markets will account for 42% of the smartphone market in 2017, up from 32% today.
The scale economies that firms such as Lenovo, Samsung, and Huawei can bring to bear will ensure they can continue to dominate a business that is now being driven by falling prices.
Despite these prospects, Lenovo's stock dipped more than 8% on news of the deal, primarily because of the short-term impact on its cash in the wake of Lenovo's recent $2.3 billion acquisition of IBM's x86 server business.
Lenovo CEO Yang Yuanqing told Bloomberg: "Before, we only had PCs as a core business. Now, we've built two pillars: the first is enterprise, and the second is this mobile business."
Yuan says Lenovo will retain the Motorola brand.
— Robert Clark, contributing editor, special to Light Reading