What are the deep-seated reasons behind Lenovo’s dream of breaking the Science and Technology Innovation Board?

What are the deep-seated reasons behind Lenovo’s dream of breaking the Science and Technology Innovation Board?

According to media reports, on September 30 this year, Lenovo Group’s prospectus for listing on the Science and Technology Innovation Board submitted to the Shanghai Stock Exchange was accepted, which means that its long-planned “return to A plan” has officially taken the first step.

However, what people did not expect is that it took only one working day. On October 8, both Lenovo Group and its sponsor, CICC, withdrew their listing application documents, and the Shanghai Stock Exchange also issued an announcement and decided to terminate it. Review of the company’s public issuance of depositary receipts and listing on the Science and Technology Innovation Board.

Many people may be surprised that Lenovo Group’s IPO on the Science and Technology Innovation Board has come a bit fast, but from the data point of view, it is an inevitable result.

According to the financial report, in the first half of this year, Lenovo Group’s R&D expenses accounted for only 2.75% of its total revenue, while its R&D expenses in the past three years accounted for 2.48%, 2.63%, and 2.48% of the current revenue, respectively. .39%, far below the requirement of the Science and Technology Innovation Board that “the cumulative R&D investment in the past three years should account for more than 15% of the cumulative operating income in the past three years”.

Perhaps, when Liu Chuanzhi chose the path of “trade, industry and technology” more than 20 years ago, today’s broken dream was doomed.

Lenovo, once the No. 1 technology company in China

The history of Lenovo can be traced back to 1984. Its predecessor was the “New Technology Development Company of the Institute of Computer Science, Chinese Academy of Sciences” under the Chinese Academy of Sciences. Due to the relationship of the Chinese Academy of Sciences, the computer institute at that time gathered the most authoritative industry experts in China, and its research and development capabilities were second to none in the country.

In the late 1980s, computers began to enter China, but there was a big problem with the computers at that time-the Chinese character input method was too complicated. Since the computer was born in the United States, the standard input method is all English. If you want to input Chinese characters, you need a series of long codes, which is very inconvenient.

In order to solve this problem, under the leadership of Ni Guangnan, the “Academician of the Chinese Academy of Engineering” where the computer is located, a new Chinese character system “Association” has been developed. The most commonly used phrases, because of its convenience and efficiency, this input method has been popularized and used after its launch, and later it has brought tens of millions of benefits to the computer.

Later, as “Lenovo Hanka” became famous all over the country, the computer institute was directly named “Lenovo”.

After developing the Chinese character system, Lenovo has not stopped moving forward. In the late 1990s, with the continuous innovation of instant messaging technology, traditional old switches were gradually eliminated, digital switches slowly emerged, and the communications industry came to a new era.

Lenovo, which had strong research and development capabilities at that time, did not miss this opportunity. Under the leadership of Ni Guangnan, Lenovo launched a digital switch developed by itself, and successfully won a large order in the telecommunications market.

In addition to switches, it must be mentioned that Lenovo even developed chips independently at that time.

According to media reports, as early as 1985, Lenovo designed and developed a “Lenovo Hanka” and a microcomputer, which won the first prize of the National Science and Technology Progress Award, and began to develop chips in 1988, and successfully developed five ASIC chips in 1993. And realized industrialization.

It can be said that in terms of technology, Lenovo was indeed the first in China at that time.

Wrong choice of “trade, industry and technology” route?

If it continues the previous direction, Lenovo has a good chance to become the top technology company in China and even in the world.

However, the next series of operations turned Lenovo directly from a high-tech enterprise into an “assembled” enterprise, and its technological heritage gradually dissipated.

Around 1994, due to the cancellation of the import approval documents, the import tariffs on computers were greatly reduced, and foreign computer giants began to flood into the Chinese market. The computer industry, which had no strong competition before, suddenly became fiercely competitive, and Lenovo had to start seeking changes.

At this point, Lenovo, which already has a certain scale, faces two choices:

Take the road of “trade, industry and technology”. This road is represented by Liu Chuanzhi. They believe that in the face of foreign competition, we should give full play to the price advantage of the domestic market and avoid falling into the competition of technology research and development.

Second, take the road of “technology, industry and trade”. This road is represented by Ni Guangnan. They believe that in the face of foreign competition, resources should be invested to seize the commanding heights of technology research and development, especially the core components of computers, such as operating systems and chips, to use technology to win the market.

What happened next, I believe everyone has heard of it. Since Liu Chuanzhi’s share of equity is higher, Lenovo finally chose the “trade, industry and technology” path; with the change of development direction, the equity of the technical staff originally represented by Ni Guangnan also changed from the original % Twenty became zero. After that, a large number of technicians left, and Ni Guangnan also left Lenovo in disappointment.

After choosing “trade, industry and technology”, Lenovo has ushered in a period of rapid development without the “drag” of high R&D expenses. At its peak, Lenovo even devoured the PC business of computer giant IBM in a way of “snake swallowing an elephant”, making it one of the world’s top computer manufacturers.

However, although the scale is constantly expanding, Lenovo has also been suffering from the loss of no core technology.

One of the obvious points is reflected in the net interest rate. Due to the lack of Lenovo’s core technology, a large number of core components need to be outsourced, which leads to a very low net interest rate. According to the data in the semi-annual report, Lenovo’s net profit margin is only a pitiful 2.87%, and behind the 109.3 billion revenue, the net profit attributable to the parent is only 3.011 billion yuan.

Because of this, more people think that Lenovo is just a “assembled” enterprise, which is not much different from Foxconn in essence.

Science and Technology Board Dream Broken

On October 8, Lenovo and its sponsor, CICC, respectively withdrew their application documents for listing on the Science and Technology Innovation Board, and it was only 8 days after their prospectus was accepted.

Why did Lenovo Group terminate the IPO on the Science and Technology Innovation Board? The response it gave was “worry about the invalidation of financial information”: considering the scale and complexity of the company’s business, the financial information in the prospectus may expire during the review process of the application. At the same time, after careful consideration of the capital market-related situations such as the latest issuance and listing, the company decided to withdraw the application for listing and trading of China Depository Receipts and the Science and Technology Innovation Board.

However, this may not be the main reason, but more likely because the investment in technology is not up to standard.

According to the financial report, in the past three years, Lenovo Group’s R&D expenses accounted for 2.48%, 2.63%, and 2.39% of the current revenue respectively, which is less than 8% in total, which is far from reaching the Science and Technology Innovation Board. “The cumulative R&D investment in the past three years needs to account for more than 15% of the cumulative operating income in the past three years”.

It can be said that as early as 20 years ago, after choosing the path of “trade, industry and technology”, the ending of Lenovo Group’s dream of breaking the science and technology board was already doomed.