Huawei selling Honor brand to agent-dealer consortium to keep smartphone unit alive

According to Reuters, Huawei selling Honor brand to agent-dealer consortium to keep smartphone unit alive.

SHENZHEN, China (Reuters) – Huawei Technologies Co Ltd is selling its budget brand smartphone unit Honor to a consortium of more than 30 agents and dealers in an effort to keep it alive, the company and consortium said Tuesday.

The deal comes after US government sanctions curtailed supplies to the Chinese company because the company is a threat to national security – which it denies.

The consortium released a statement on Tuesday announcing the purchase, which will be made through a new company, Shenzhen Zhixin New Information Technology.

Huawei will not hold shares in the new Honor company after the sale, the statement said.

In Huawei’s statement, the company said its consumer business is under “tremendous pressure” due to the “continued unavailability of technical elements” for its phone business.

“This move has been made by Honor’s industry chain to ensure its own survival,” said Huawei.

The change of ownership will not affect Honor’s development direction, both statements said.

No grade was given for the deal.

Knowledgeable sources say the US government’s constraints have forced the world’s second largest smartphone maker – after Samsung Electronics Co Ltd in South Korea – to focus on high-end handsets and business-oriented business.

A source said Tuesday that the US government will have no reason to impose sanctions on Honor after it secedes 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 cheaper mobile phone market. It also sells phones in Southeast Asia and Europe and ships 70 million units annually, according to Huawei’s statement.

Electronics products and appliance store Suning.com is listed as one of the buyers, including several state investment companies in Huawei’s hometown, Shenzhen.

Honor will look for more investment partners in the future, with the possibility of a possible 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 handset distributor Digital China and the Shenzhen government.

Digital China was not part of the final buyer pool, the source said.

Huawei has said its higher-end smartphone line is also under threat from US sanctions, with the head of its consumer company saying in August that it would not be able to continue making the Kirin chips that power its premium models.

Offloading Honor gives Huawei some ‘breathing room’ on the sourcing side for its premium business, while focusing on the development of its proprietary HarmonyOS for smartphones, said Nicole Peng, vice president of mobility at research firm Canalys.

The sale will help sustain the brand, while providing the opportunity to buy Honor back one day, said Will Wong, an analyst at IDC.

“It will be easier for Huawei to make a possible buy-back from this consortium in the future, which may not be as straightforward if they sell it to other smartphone or electronics manufacturers,” he said.

Reporting by David Kirton; Editing by Sonya Hepinstall

© Thomson Reuters

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