Lenovo has decided to ramp up the capacity utilization rates of its handset production facilities by stepping into the OEM handset business, in a move to revive its dwindling handset business, according to industry sources.

The move is also part of Lenovo's restructuring plan for its handset business unit after the company posted a loss of US$292 million for the second quarter of 2015.

Strong competition from rivals including Xiaomi Technology, LeTV, Meizu and Huawei combined with an overlay in production between Lenovo and Motorola have inflicted heavy losses on Lenovo's mobile business unit, indicated the sources.

Excluding shipments of Motorola-branded products, smartphone shipments from Lenovo have actually begun to decline, revealed the sources.

However, Lenovo's entry into the OEM handset business is expected to create strong impact on the handset OEM ecosystem and its production partners, particularly Compal Electronics and FIH Mobile, said the sources.