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Lenovo looks to India for smartphone boost

Lenovo looks to India for smartphone boost

Lenovo's smartphone business has been gaining steam in India

Struggling Lenovo is looking to neighboring India for some smartphone growth.

On Tuesday, the Chinese company announced it would for the first time build smartphones in the country, with a new facility located in the Indian city of Chennai.

The assembly plant will produce 6 million smartphone units over the next seven months to the end of Lenovo's fiscal year, the company said.

Lenovo is making the investment days after it reported weak second quarter earnings. Demand for PCs has been especially weak, and competition in the smartphone industry only continues to grow, particularly in China, Lenovo's home market.

As a result, Lenovo last week announced it would lay off 3,200 employees, in addition to cutting costs at its recently acquired Motorola Mobility division. However, the company is still focused on expanding its smartphone business, in spite of the challenges.

India is currently the world's third market largest for smartphones, behind China and the U.S., according to analysts, and Lenovo's handsets are gaining in popularity there.

In the second quarter, the company was the fifth largest smartphone vendor in India, according to research firm Canalys.

Lenovo's assembly unit in Chennai has 1,500 workers, and will assemble products for both the company brand and its Motorola division. The Moto E, a lower-end handset, is already rolling out from the factory.

Lenovo joins other Chinese smartphone vendors that want to tap the Indian market. Earlier this month, rival Xiaomi also announced it would begin producing phones in the country, with the help of manufacturing giant Foxconn Technology Group.

Although China remains the world's largest smartphone market, demand there has been slowing. Growth in India's handset market, however, is robust. In the second quarter, shipments were up 44 percent year over year, according to research firm IDC.

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