Huawei shrinks the smartphone business to survive

A consortium of buyers said on Tuesday that it acquired Huawei’s Honor smartphone brand for an undisclosed amount of money. Buyers include more than 30 Chinese agents and distributors of the budget brand. Huawei and the group of buyers said they reached an agreement to help save Honor’s supply chain and protect consumers and sellers. The Trump administration has cut off the Chinese company’s access to vital technology, such as chipsets and software for its smartphones and 5G telecommunications equipment. Washington says Huawei poses a threat to national security, allegations the company has long denied.

Ditching Honor Gives Huawei’s Top Smartphone Brand More Fighting Opportunities

It’s also a much-needed respite for Huawei. Selling Honor means the beleaguered Shenzhen company can now free up resources to focus on its own flagship smartphone brand, according to Nicole Peng, an analyst at market research firm Canalys, who stockpiled inventory before the latest round of sales was announced. restrictions earlier this year. Still, its rotating chief executive said at a conference in September that the company is in a “difficult situation” and that “survival is the goal.” “Survivability means they have to make sure they have enough components to have business continuity for a longer period of time,” Peng said. The Honor download will give Huawei’s smartphone unit some breathing room. ” It will definitely be a lot less burden on their shoulders, “said Peng.” They only have a limited supply of components. At least those can [now] be preserved for Huawei’s higher-end brand, “he added. Huawei will not own shares or participate in any business management or decision-making activities in the new Honor company, according to a company statement. Meaning that” Honor you should be able to get your own components … [and] sign their own contracts, ”according to Peng. U.S. sanctions on Huawei may be eased once President-elect Joe Biden takes office. But there is no guarantee that a Biden administration will revoke restrictions on the Chinese tech company. “The future and prospects for Huawei are still very uncertain,” said Will Wong, an analyst at market research firm IDC. “So they have to focus on what they have, and the best thing they have is the high-end models.” The company’s flagship phones, such as the P and Mate series, sell for more than 4,500 yuan ($ 683) and 6,400 yuan ($ 972), respectively. Honor phones are much cheaper: the latest 10X series starts at around 2,100 yuan ($ 319), and the lower-end Play phones sell for just 1,200 yuan ($ 183). Focusing on flagship devices will help Huawei “maintain its high-end brand image and also generate more revenue,” Wong said.

Losing Honor will affect Huawei’s smartphone world rankings

Without Honor, Huawei’s total smartphone sales will suffer. Earlier this year, the company achieved its long-standing target and briefly became the world’s top smartphone seller, helped by a slump in sales from rival Samsung. The achievement would not have been possible without Honor. For almost the last two years, the budget brand has represented between 25% and 29% of Huawei’s total smartphone shipments, according to IDC data. Canalys, which uses a different method to calculate shipments, found that Honor accounted for 20% for 40% of Huawei’s total sales In the second quarter of this year, the period in which Huawei achieved a victory over its South Korean rival, Honor, accounted for more than a quarter of the company’s total smartphone sales, according to IDC and Canalys. Without the roughly 15 million Honor devices sold in the April-June quarter, Huawei would not have landed on the top of the podium. Samsung has already regained first place in the July-September quarter, with Huawei ranking second in global smartphone sales, according to IDC and Canalys. Without Honor phones, Huawei would have moved to third place, behind Chinese smartphone maker Xiaomi.