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HUAWEI Technologies Co. sold its Honor smartphone business to a Chinese government-backed consortium for an undisclosed amount, parting ways with the entry-level device arm after the Trump administration cut off its access to American technology.
The consortium was formed by Shenzhen Smart City Technology Development Group Co. and more than 30 Honor partners, agents and distributors, from private giants like Suning.com Co. to government-affiliated entities like a branch of China Postal and Telecommunications. . Huawei will no longer have Honor shares after the transaction.
The deal could help grow a brand that has gained popularity with younger budget-conscious users in recent years and has made headway in foreign markets such as Europe. It is unclear whether Honor’s spin-off will lead to the resumption of supply of US chips to their new owners. Shares of rival smartphone maker Xiaomi Corp. fell as much as 6% on Tuesday in Hong Kong.
“This move has been made by Honor’s industrial chain to ensure its own survival,” the company said in a statement. “Huawei’s consumer business has been under tremendous pressure lately. This is due to a persistent lack of technical elements necessary for our mobile phone business.” Honor was an integral part of Huawei’s smartphone business, once bigger than Samsung Electronics Co., but now struggles to secure enough critical components and software for production. The sale illustrates the uneven impact of the White House sanctions on China’s largest tech company, whose consumer business is weakened even as its networking unit keeps going. Shenzhen-based Huawei is said to have safeguarded its core telecom equipment business by stocking critical components to continue supplying its home country’s 5G deployment until at least 2021.
Citing national security concerns, the United States has carried out a wide-ranging campaign against Huawei since 2018 that led its CFO to house arrest in Canada and promoted a ban on the use of the company’s 5G equipment in countries from the UK. to Japan. The final blow came when the White House enacted sweeping restrictions against vendors this year, closing loopholes that allowed Huawei to purchase pre-made semiconductors to keep its consumer business afloat.
Huawei’s smartphone shipments plunged 22% in the September quarter due to US sanctions, according to research firm IDC. It now has to defend its No. 2 position against other Chinese players from Vivo to Xiaomi Corp., which saw a 42% increase in Q3 shipments, IDC data shows.
Honor has been operating as a budget phone brand alongside mainstream phones like the Mate series, and it doesn’t compete directly with the best deals from Apple Inc. or Samsung. Honor-brand phones sell for as little as 899 yuan ($ 137) and fetch around 4,000 yuan. The most expensive Huawei phones cost up to 17,000 yuan, beating the more expensive iPhone 12 Pro Max. Honor also competes with its own father in a range of consumer electronics, from gaming laptops to smart watches.
Honor’s other new owners include local corporations such as Shenzhen Expressway and Shenzhen Energy. It can lean on Suning, the country’s largest electronics chain backed by Alibaba Group Holding Ltd., to help improve distribution.
“The change in ownership will not affect Honor’s development direction or the stability of its executive and talent teams,” the company said in a statement to local newspapers. “It is the best solution to protect the interests of consumers, channel sellers and Honor providers, partners and employees.” – Bloomberg
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