Tuesday 17th November 2020
The US sanctions are making business with smartphones more difficult for the Chinese company Huawei. To save its Honor brand, the telecom giant is selling its subsidiary. But can independence ensure Honor’s survival?
Under massive pressure from US sanctions, China’s telecom giant Huawei sold its smartphone brand Honor, making it independent. A consortium of 30 business partners is taking over the company, as Huawei announced in Shenzhen. No information was given about the amount of the deal. But experts estimate the value of Honor according to media reports at around 100 billion yuan, the equivalent of 12.8 billion euros. After the transaction, Huawei no longer holds shares in Honor and is no longer involved in the management, the group announced.
“Huawei’s consumer business has recently been under massive pressure,” said the company, referring to the US sanctions. “The reason is that technical elements that are necessary for our smartphone business are not available in the long term.” For this reason, Huawei is selling the company to the Shenzhen Zhixin New Information Technology consortium to help Honor dealers and suppliers “get through these difficult times”.
According to this information, Honor sells around 70 million smartphones a year – mostly phones in the lower and middle price range to younger customers. The brand had a market share in China of around 15 percent in the third quarter – just behind Huawei itself, as the “South China Morning Post” reported. The share of Huawei’s smartphone business was estimated at a quarter to a third.
“The Honor industrial supply chain took this step to ensure its own survival,” said Huawei. Up until now, Honor was dependent on Huawei’s technology, so the brand also suffered from US sanctions. Under new owners, the company can develop its products more flexibly and potentially also do business with the US chip manufacturer Qualcomm or Google, which Huawei is denied today because it is on a blacklist in the USA.
In Honor’s canals, “water should keep flowing”
“Honor’s independence from Huawei is expected to ensure that ‘the water continues to flow’ in Honor’s channels and save upstream and downstream suppliers,” the official Chinese news agency Xinhua quoted informed people familiar with the transaction as saying. “If not handled properly, more than a million people could lose their jobs.”
The US sanctions make it difficult for Huawei to access US software and technology, even if they come from companies outside the US. Since Huawei has to make itself increasingly independent of US technology, the group also needs new capital, according to experts, which could come from the sale of the subsidiary. For Honor, however, independence also means that it now has to conduct its own research and development. According to media reports, the new owners are allegedly already thinking of going public in a few years.