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Huawei selling budget smartphone unit Honor in rescue move

Written by Wency Chen Published on 

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Huawei says it will not have any shares in Honor, nor will it participate in its management after the deal.

Huawei on Tuesday announced that it has sold Honor, its sub-brand for budget smartphones, to a consortium of buyers that include agents, dealers, and government-backed entities, in a “rescue move” to preserve it from US sanctions.

The buyer, Shenzhen Zhixin, was founded at the end of September by Shenzhen Smart City Group and more than 30 of Honor’s dealers, including Telling Telecommunication, ​Suning.com​, and Shenzhen Sundan Chain Store. “After the deal, Huawei will not have any shares in Honor, nor will it participate in the management and decision-making,” Huawei said in a statement.

The parties described the deal as a self-rescue move for the Honor-related industry chain, ensuring the interests of consumers, agents, suppliers, partners, and employees. The transaction value wasn’t disclosed. It was reported last week that Honor would be sold for an all-cash price of RMB 100 billion (USD 15.2 billion).

The sale comes under the mounting pressure from US sanctions requiring American companies to obtain licenses before selling products to Huawei. “Selling the unit can monetize parts of Huawei’s efforts for other projects,” said Mengmeng Zhang, an analyst at research firm Counterpoint. “It is a smart move at a time when the US crackdown on Huawei’s chipset supply and 5G technology won’t have a turning point any time soon.”

Set up in 2013, Honor has become a competitive brand itself. Last year, it accounted for 29% of Huawei’s annual shipments, as per Counterpoint stats, with a similar number projected for this year. “Honor’s shipments rank second in the Chinese market, even surpassing Xiaomi,” Zhang noted.

The US sanctions, which are posing threats to Huawei’s hardware supply and blocked access to Google’s mobile services, have been weakening the company. In the three months to the end of September, Huawei shipped 50.9 million smartphones, down 24% from the same period last year and its market share dipped to 14% from 18% in the third quarter of 2019, according to Counterpoint.

“Google’s mobile services will probably come back to Honor’s handsets after the spinoff, which will help the brand earn more customers overseas,” Zhang said. Honor’s top export markets are Central and Eastern Europe, followed by the Middle East and Africa.

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