Huawei Technologies is in talks with Digital China Group and other suitors to sell parts of its Honor smartphone business unit in a deal that could fetch up to 25 billion yuan or $3.7 billion, Reuters reported.Huawei is resetting its priorities due to U.S. sanctions and will focus on its higher-end Huawei phones rather than the Honor brand which is aimed at young people and the budget conscious.
The assets to be sold have yet to be finalised but could include Honor’s brand, research & development capabilities and related supply chain management business.
Digital China, the main distributor for Honor phones, has emerged as the frontrunner but other prospective buyers include Chinese electronics maker TCL and rival smartphone maker Xiaomi.
Huawei, the world’s biggest telecoms equipment vendor and No.2 smartphone maker, declined to comment.
The Honor brand was established by Huawei in 2013 but the business mostly operates independently from its parent.
Kuo Ming-chi, an analyst at TF International Securities, has said that any sale by Huawei of the Honor smartphone business would be a win-win situation for the Honor brand, its suppliers and China’s electronics industry.
“If Honor is independent from Huawei, its purchase of components will no longer be subject to the U.S. ban on Huawei. This will help Honor’s smartphone business and the suppliers,” he wrote in a research note last week.
The U.S. government last year moved to prevent most U.S. companies from conducting business with Huawei, saying the tech giant was ultimately answerable to the Chinese government. Huawei has repeatedly denied being a national security risk.
In May, Washington announced new rules aimed at constricting Huawei’s ability to procure crucial chips that it designs for 5G networking gear and smartphones.
The Honor brand, which sells its phones online through its own sites and via third-party retailers, competes with Xiaomi, Oppo and Vivo in the market for lower-end phones in China. Its phones are also sold in Southeast Asia and Europe.
Honor brand smartphones accounted for 14.6 million, or 26 percent of the 55.8 million smartphones Huawei shipped in the second quarter of this year, according to estimates from research firm Canalys.
Honor booked less than 5 billion yuan in net profit on revenue of about 70-80 billion yuan last year.