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SHENZHEN, China – Huawei Technologies Co. Ltd. is selling its Honor budget-brand smartphone unit to a consortium of more than 30 agents and distributors in a bid to keep it alive, the company and consortium said Tuesday.
The deal comes after U.S. government sanctions have restricted supply to the Chinese company on the grounds that the company is a threat to national security, which it denies.
The consortium issued a statement Tuesday announcing the purchase, which will be carried out through a new company, Shenzhen Zhixin New Information Technology.
Huawei will have no shares in the new Honor company after the sale, according to the statement.
In Huawei’s statement, the company said that its consumer business has been under “tremendous pressure” due to the “persistent lack of availability of technical elements” for its telephony business.
“This move has been carried out by Honor’s industrial chain to ensure its own survival,” Huawei said.
The ownership change will not affect Honor’s development direction, both statements said.
No figure was given for the deal.
Sources with knowledge of the matter say that US government restrictions have forced the world’s second-largest smartphone maker, after South Korea’s Samsung Electronics Co. Ltd., to focus on high-end phones and business-oriented businesses.
A source said Tuesday that the US government will have no reason to impose sanctions on Honor after it severs from Huawei.
Honor sells smartphones through its own websites and third-party retailers in China, where it competes with Xiaomi Corp., Oppo, and Vivo in the market for lower-priced phones. It also sells phones in Southeast Asia and Europe, and ships 70 million units a year, according to the Huawei statement.
Electronics and home appliance store Suning.com is among the buyers, which include several state-owned investment firms in Huawei’s hometown of Shenzhen.
Honor will seek more investment partners in the future, with the possibility of an eventual listing, the source said.
Reuters reported earlier this month that Huawei was in talks to sell Honor in a 100 billion yuan ($ 15.2 billion) deal to a consortium led by phone distributor Digital China and the Shenzhen government.
Digital China was not part of the final buyer pool, the source said.
Huawei has said that its line of high-end smartphones is also threatened by US sanctions, and the head of its consumer business said in August that it could not continue to make the Kirin chips that power its premium models.
The Honor download will give Huawei a “breathing space” on the sourcing side of its premium business as it focuses on developing its proprietary HarmonyOS for smartphones, said Nicole Peng, vice president of mobility at industry research consultancy Canalys.
The sale will help maintain the brand, while allowing the possibility of buying Honor again one day, said Will Wong, an analyst at IDC.
“It will be easier for Huawei to make a possible buyback in the future of this consortium, which might not be so easy if they sell it to other smartphone or electronic manufacturers,” he said. – Reuters
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