Lenovo's Layoff Wave: From Shanghai to Bangalore

Everyone, it’s the weekend today, and we’ve got a live stream coming up shortly, so let’s just keep this brief. I recently saw the news about Lenovo’s “two-minute layoff storm,” and it was pretty shocking. The entire ISG—the Infrastructure Solutions Group—in Shanghai saw over a hundred employees laid off all at once. Lenovo is scaling back operations in China while expanding into India; from a geo-industrial perspective, it’s quite complex. On December 1, Lenovo issued a last-minute notice for a 15-minute online meeting, but the executive leading the meeting was 13 minutes late. With only two minutes left, a pre-recorded message was played, unilaterally informing everyone that the company’s decision was that everyone present had been “optimized”—and the meeting was adjourned. Employees complained that, even though it was clearly Lenovo, the company used the “art of language” to package it as a “special bonus” for the team—when in reality, it was severance pay. Everyone had to rely on their own skills to negotiate an “N+2” or “N+3” package; those who were lucky might even get “N+6.” Lenovo had just released its second-quarter financial report at the end of last month, and the numbers were solid: the group’s total revenue grew by 15%, while ISG’s revenue grew by 24%—truly impressive results. So many people were surprised that the ISG division was actually shut down. ISG is one of Lenovo’s three major business segments; the other two are Intelligent Devices (IDG) and Solutions & Services (SSG). ISG focuses on stability, while SSG generates high profits. ISG had the highest revenue growth, but its profitability was highly unstable. It originated from IBM’s server business and later evolved into the Data Center Group (DCG). After being reorganized into ISG in 2021, it came to include cloud services and AI infrastructure. Its hardware operations compete with Dell and HPE, with price wars driving industry profit margins to rock-bottom levels. Cloud services also generate solid revenue and high shipment volumes, but their gross margin remains below the industry average. The ISG segment was profitable in 2023–2024, but as Lenovo approaches its 40th anniversary, Yang Yuanqing has stated that the next decade will focus on accelerating the AI transformation. Consequently, the company has made massive investments in R&D, particularly in cutting-edge fields such as high-performance computing and liquid cooling technology. These strategic investments have incurred significant upfront costs, resulting in a loss of over $30 million in this quarterly report. The profitability of the legacy businesses is insufficient to support the new cost structure, making the entire segment seem somewhat redundant. Lenovo’s latest moves have been extremely decisive—even aggressive. It’s not just the ISG in Shanghai; R&D teams elsewhere that support it—including those working on software, firmware, and operating systems—have also been affected. Layoffs weren’t limited to China; in July, the company also laid off more than 100 employees in the United States. But it’s not just about layoffs—there’s also expansion. Lenovo has identified India as a key platform for the future, positioning it as a hub for AI development, semiconductor manufacturing, and digital infrastructure. It has established an AI center in Bangalore and plans to rapidly expand its workforce there from 400 to 1,400 employees. This includes a factory in Coimbatore that will produce AI servers and GPU units. The plan is to double revenue in India over the next three years. Why the shift from China to India? Behind the group-level resource optimization and strategic adjustments lie market dynamics, talent, and geopolitics. The Indian market is growing rapidly, with AI solutions in demand across all industries. It also boasts a large pool of affordable, young IT talent. The government’s “Make in India” initiative and fiscal incentives are in place, helping to lower operating costs. Another key consideration is supply chain diversification to avoid potential tariff risks. The current global supply chain trend is “China Plus One”—selecting an alternative location outside of China, typically India, Vietnam, or Mexico, as a production base. This approach enhances supply chain resilience and reduces risk exposure. This is something every multinational corporation must consider. Lenovo began addressing this issue relatively early and has developed a well-thought-out strategy. Before it turned 20, the company was known as “Legend”; it later changed its name to “Lenovo” to facilitate registration when expanding overseas. It’s fair to say that from the very beginning, Lenovo has approached its strategic planning from a global perspective. Everyone, it’s the weekend today—let’s chat about these topics. See you in the livestream at 9:30.