Huawei sells Honor to focus on high-end smartphone business

Huawei Technologies confirmed its decision to sell the budget-smartphone business unit Honor to a consortium of over 30 agents and dealers.
Huawei Honor smartphone business
The deal comes after U.S. government sanctions have restricted component supplies to the Chinese company on grounds the firm is a national security threat. Huawei earlier said that it does not have any connection with China government.

Huawei did not indicate the financial details of the deal. 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 group, the source said.

Huawei statement did not indicate about any possible job cut after selling the low-end smartphone business.

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

Huawei will not hold any shares in the new Honor company after the sale.

Huawei revealed that its consumer business has been under tremendous pressure due to the unavailability of technical elements for its smartphone business.

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

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

U.S. government restrictions have forced Huawei, the world’s second-biggest smartphone maker to focus on high-end handsets and corporate-oriented business.

The U.S. government will have no reason to apply sanctions to Honor after it separates from Huawei.

Honor sells smartphones through its own websites and third-party retailers in China, where it competes with Xiaomi, Oppo and Vivo in the lower-priced handset market. It also sells phones in Southeast Asia and Europe, and ships 70 million units annually, according to the Huawei statement.

Huawei has said its higher-end smartphone business is also under threat from the U.S. sanctions, with the head of its consumer business saying in August that it would be unable to continue making the Kirin chips that power its premium models.

Offloading Honor will give Huawei some breathing room on the sourcing side for its premium business while it focuses on developing its HarmonyOS for smartphones, said Nicole Peng, vice president of mobility at industry research consultancy Canalys.

The sale will help to sustain the brand, while allowing the possibility of buying Honor back some day, said Will Wong, an analyst at IDC.

“It will be easier for Huawei to make a potential buyback in the future from this consortium, which might not be so easy if they sell it to other smartphone or electronics makers,” he said.