Flush with cash from selling PCs by the bucket-load, China’s Lenovo has gorged itself on two massive acquisitions, splashing out $2.3 billion on IBM’s x86 server business, before following it up with a $2.9 billion grab for Motorola. That’s a tasty $5.2 billion worth of acquisitions in the space of about a week, and illustrates just how ambitious the PC giant has become.

The deals also reveal quite a bit about the state of play in Chinese industry right now. China’s economy got where it is because it effectively became the world’s biggest factory, but the global picture is rapidly changing. As wages rise, China is losing its competitive edge, and now its companies are being forced to compete with their international rivals on an equal footing, leveraging their branding, technology and business know-how.

That helps explain what Lenovo is up to right now. The company, which is one of China’s most internationally renowned and best-managed enterprises, has fought tooth and nail to surpass HP as the world’s number one PC maker. For that Lenovo deserves a pat on the back – but it can’t afford stand still, as PC sales have slowly been dwindling as consumers opt for tablets and smartphones. That’s not to say that Lenovo doesn’t have a hand in these markets either – it does – but outside of China, its market share is but a drop in the ocean compared to the likes of Samsung and Apple.

Lenovo’s acquisition of Motorola is an obvious attempt to catch up in the vital mobile space – by doing so, it’s absorbing a brand that’s already established in the US and other major markets like Europe, together with its distribution channels and technology. Buying Motorola is like injecting a little nitromethane into it’s own mobile efforts, giving it the quick boost it needs to stand any chance of catching up.

Shaking up the server market

Less obvious is why Lenovo wanted IBM’s x86 server business so badly. As Wikibon’s Principal Research Contributor Stu Miniman pointed out on theCUBE last month, IBM’s x86 business has been shrinking, with a double digit decrease in the last quarter, and that’s hurt the company’s bottom line. It’s not only IBM that’s been feeling the pinch, as all the traditional vendors are suffering due to intense competition from Taiwanese white box manufacturers in the x86 market’s last big growth area – huge, web-scale companies.

The server market is changing rapidly, thanks to the influence of public cloud-like, custom configurations from Amazon Web Services, not to mention open-source powerhouses like OpenStack and Open Compute. The big players, such as Oracle, Cisco and IBM, are all moving away from low end markets to focus more on software and services, and that leaves an opportunity for anyone who’s aggressive enough to take it on.

Lenovo’s acquisition instantly makes it a major player in the x86 server business, giving it worldwide sales reach and a full slate of proven products. Lenovo’s revenues in the segment will increase almost ten-fold , while it’ll assume the No.3 position in the market, from its previous position of No. 6.

“We’ve gone from being an upstart to being very relevant,” said Gerry Smith, the head of Lenovo’s North American business, at the time of the deal.

That’s not to say Lenovo will have it easy – the x86 server business is a seriously competitive one, but the company has a long track record of kicking ass in tough markets. We only have to look at what Lenovo did with IBM’s poorly-performing PC arm after snapping it up back in 2005 – it’s reinvigorated the company’s iconic ThinkPad line, and it’s sales and product portfolio have risen so dramatically that it’s now the number one PC maker in the world. And it’s made a shed load of cash in the process, which isn’t exactly an easy thing to do either.

Apple and Samsung in the cross-hairs?

Lenovo’s success in the ridiculously tough PC market can’t be denied, and there’s no reason why it won’t be just as successful in the x86 server business too. After all, both markets have a lot in common – each is viewed as a low-margin segment that offers little chance of decent returns, and both have suffered from a lack of investment and focus on the part of IBM. But this hides the fact that they’re both worth billions of dollars. The global PC market still rakes in some $200 billion a year, while server sales generate close to $50 billion – in other words, there’s still a ton of cash to be made in both markets.

We should note that it was only last week Lenovo announced it was reorganizing its businesses into four distinct units – enterprise, ecosystem-and-cloud, mobile and PC groups – as it strives to move away from its dependency on PCs. And that’s the whole point of this server acquisition – Lenovo wants to use the profits from that, together with its PC division, to fund its next big push, into the highly lucrative smartphone business.

As Fortune’s Miguel Helft explained in his own analysis, the cash that Lenovo generates from its low-end servers could easily give it “the breathing room it needs to invest more heavily in its mobile business”, potentially allowing it to one day emerge as a serious rival to Samsung and Apple.

Cautious investors might be getting a bit jittery over Lenovo’s recent moves, but it’s clear to Wikibon’s Dave Vellante that the company has a long-term plan that it’s ready to execute.

“This should be a wake up call for American business leaders and politicians in Washington,” warned Vellante. “Lenovo is a great example of a china success story where governments are aligning with businesses to compete globally”

“It now has a portfolio from mobile to server room. The company will have challenges penetrating new markets, but Lenovo is essentially executing on the strategy laid out by HP several years ago.”

And that’s why the Motorola acquisition is so vitally important too. Lenovo was reportedly looking to buy an established smartphone brand for years, previously being linked with takeovers of BlackBerry and NEC, among others.

Buying Motorola gives Lenovo some clear advantages, and it’s also an indication of two important facts – first, that Chinese companies realize they’re incapable of taking on established firms like Apple and Samsung as they are now; and second, that they have the money, the assertiveness and the approval of China’s government to do whatever they feel is necessary to compete.