More turmoil buffets Lenovo as rumors fly about 5G standards

Updated 2018-05-17 13:29:00

Top executives of Chinese technology company Lenovo Group issued a joint denial on Wednesday of market rumors that the company had failed to back its Chinese counterparts when they competed with global peers to set fifth-generation (5G) standards two years ago.

The rumors caused Lenovo Group's shares in Hong Kong to weaken, dipping 0.26 percent to H.81 (.49) on Wednesday.

Since May 10, posts have been circulating via Quora-like site zhihu.com, alleging that Lenovo did not support a Huawei Technologies Co-led coding scheme called Polar during 5G standard setting meetings held by the 3rd Generation Partnership Project (3GPP), a global telecommunications standards body, in 2016.

Some went so far as to call Lenovo a traitor.

Those comments "severely harmed" the company's reputation and "greatly shocked" Lenovo's founder Liu Chuanzhi, according to a joint letter issued by Liu, Lenovo Group CEO Yang Yuanqing, and Zhu Linan, president of Legend Holdings, Lenovo's parent company.

"Lenovo did nothing wrong," said Liu.

Lenovo admitted that it voted for the US-proposed LDPC (Low-Density Parity-Check) code during the 3GPP's meeting that was held in October 2016, citing the company's rich patent portfolio related to that scheme. This was a choice made based on the company's interests, according to the letter.

But Liu said that at the 3GPP's meeting in November 2016, the company voted for Polar, even though it had few patents for this technology, after "we took account of the development of the domestic [telecom] industry."

Both meetings were held to define the coding schemes for the application of 5G in enhanced mobile broadband scenarios.

It is crucial to make domestic technologies a part of global standards for telecommunications. Counterparts from the US and EU have long been the leaders in setting network standards, which made it hard for Chinese companies to get a bigger slice of the mobile internet bonanza in previous generations.

Polar was in the end selected by more than 50 participants as the official coding method for the control channel functions, while LDPC was chosen as the code for data channels. Lenovo reportedly did not cast the deciding votes.

Besides the executives' joint letter, Lenovo got some support from Huawei, which verified that Lenovo voted Yes on the Polar scheme at the meeting in November 2016, and it thanked the computer giant for that.

The rumors come as Lenovo is trying to turn around its mobile business. Its recent lackluster performance on the mobile front has been a sore spot in its earnings.

Lenovo's latest financial report showed that the company swung to a net loss of 2 million for the nine months ended in December 2017, from a profit on 8 million a year ago, with revenues from its mobile business dropping 5 percent.

Lenovo will be removed from Hong Kong's Hang Seng Index on June 4, as a result of the index's quarterly review. The company's shares have plunged by nearly 60 percent since it joined the gauge in 2013.

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