00:00Winston Cheng, CFO of Lenovo, joins us from New York City.
00:04And Winston, it's great to have you on the program.
00:05Thank you, Ed.
00:06Thank you very much for the time.
00:07You know, everyone knows Lenovo, leading PC maker in the world.
00:12But I think to start, I wonder if we could just go a bit deeper into what AI-related revenues
00:17actually look like for Lenovo, define them,
00:20and then we can extrapolate out on what the story is here.
00:23Yeah, we're certainly very well known for our PC, given our dominance in the space for many, many years.
00:28But we are actually more than a PC maker.
00:31We have the most complete portfolio in terms of devices, from PCs to tablets to smartphones.
00:37It's the most complete portfolio at scale on a global basis, on a non-IOS basis.
00:42And that serves as the foundation for AI devices going forward in terms of our product portfolio set.
00:48We have our hybrid strategy enables us to have from the pocket to the cloud.
00:52And you're seeing that gain in terms of our infrastructure business in the latest quarter in terms of that compute
00:59capability that is now being used for infrastructure from AI training to AI influencing.
01:06The U.S. listed shares or ADRs also massive performance today.
01:11You know, I appreciate, Winston, you're the CFO.
01:13Maybe you don't keep a constant eye on the share price, but the biggest jump since 2008, it has to
01:20tell you something.
01:21Do you attribute that to the appreciation maybe that you're getting for the infrastructure business?
01:26What do you think the market is maybe seeing now that it hasn't before?
01:31Yeah, so certainly we're not defined by one quarter.
01:34We're in for the long haul.
01:35And the AI spend and opportunity is also for decades to come.
01:39But we're defining this as the AI decade for Lenovo.
01:42And I think we're in the first year of that journey, and you can see the result of that focus.
01:47In terms of our capabilities, we've actually been investing in this for over 10 years.
01:51Our ability to be able to produce at scale on a global basis for both on the device side and
01:58also on the infrastructure side is unique to Lenovo.
02:00We can serve hyperscalers and also enterprises on that basis as well.
02:04And our portfolio set with the IBM heritage that when we made the acquisition in 2015 gives us a solid
02:11foundation to be able to serve the AI compute capabilities today,
02:15given the high-performance compute genetics that we have with our industry liquid cooling technology as well.
02:23On Monday, Winston, I was with Jensen Wang in Las Vegas.
02:27Of course, Vera Rubin coming later this year.
02:29That matters to you.
02:31And we were speaking with one of your peers, Michael Dell.
02:34And I was trying to understand from them the story for the PC in a world where we are shifting
02:41to inference, but also agentic AI.
02:44Can you give me any evidence or data that the more commonplace use of AI agents actually drives enterprise, knowledge
02:54worker, acquisition of PCs, new PCs at scale?
02:57Yeah, we certainly see our AI PC demand being very strong, and it's been increasing in terms of our portfolio.
03:03Our AI revenues today is about 38% of our total revenues in the last quarter.
03:08And AI PC is also a very big component of that.
03:11Today, as AI training develops and more AI capabilities are being enhanced, more people will use and need to consume
03:20and interact with agents through their devices.
03:24And I think the upgrade for better and more higher performance devices will be a necessary part of that journey.
03:30You see that with the likes of the open AI and others having partnerships with either from a staffing perspective
03:38or strategic perspective with device makers.
03:41And we're also seeing that in terms of dialogues that we're having with AI companies and their desire to work
03:47with us from a go-to-market perspective as well.
03:51Winston, what is the truth of what's happening with memory?
03:55How severe is that as a bottleneck?
03:58Well, certainly this incredible spin and development of AI in terms of the AI infrastructure is really driving the component
04:06shortages, not only memory, but you're also hearing it in terms of CPU and, of course, GPU demand as well.
04:12I think that would be a multi-year opportunity in terms of that demand.
04:17But at the same time, the industry needs to catch up in terms of that supply chain to satisfy that
04:22demand.
04:23But I think for now that's causing the supply and demand imbalance is causing the memory prices to go up.
04:30But on the AI infrastructure side, we're able to pass through that demand because that's where the strong demand is
04:35in terms of the pricing for the pass-through.
04:38But on the device side, I think the lower end, you're starting to see in terms of the first quarter
04:43IDC numbers that the those that cannot get supply, I think, have seen the market shares decline.
04:50So, Winston, what you just outlined, and bear with me on this one, how much are you negotiating with yourself?
04:56You have different business lines.
04:58They both need common components, high bandwidth memory.
05:03You know that on the infrastructure side, the service side, that's where the demand is.
05:08So, do you have to have a word with yourself and say, well, what about my PC business?
05:13Do you have to make a choice of where you prioritize?
05:17That's a great question in terms of, but I think what the suppliers appreciate with us is that we have
05:23that global portfolio.
05:24We have the most complete portfolio from PC to tablet to smartphone, and I think that gives them the forecast
05:31necessary as our long-term partners.
05:33We also have that demand forecast from the server side as well of our business.
05:37So, from that perspective, we are strategic partners for suppliers as well in terms of that accuracy of that forecast.
05:42We need to supply in terms of satisfying our long-term Lenovo friends in terms of the ThinkPad, which is
05:49so well-loved in the market.
05:50And I think we need to make sure that there is enough supply going to that demand as well.
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