Huawei said to divest Honor smartphone business for US$15 billion to Chinese consortium
- A group led by Digital China and the Shenzhen government is said to take over almost all of Honor’s assets, including research and development capabilities
- The deal is expected to help Huawei sharpen its focus on sourcing hi-tech components for its namesake smartphones amid US trade sanctions
The all-cash sale will include almost all assets including brand, research and development capabilities, and supply chain management, according to the report, which cited people with knowledge of the matter.
Huawei had no comment on the reported divestment.
In a filing to the Shenzhen stock exchange on Wednesday, Digital China said it has not reached any deal with Huawei in relation to Honor.
Speculation about such a sale intensified last month when a report by TF International Securities analyst Kuo Ming-chi said sourcing smartphone components by an independent Honor “will no longer be subject to the US ban on Huawei”.
Should Huawei consider selling smartphone brand Honor to survive US sanctions?
“Huawei Technologies will prioritise on its [namesake] brand, not Honor, if the company can only sell a limited number of smartphones because of the lack of chip supplies,” said Canalys analyst Mo Jia. “For Honor, the worst result would be to remain part of Huawei, become marginalised and then disappear … So anything else would be better than the business just disappearing.”
“The [Honor] deal will test the response of the US government on whether it will impose restrictions on the business or allow Honor to access chips and other supplies,” Canalys’ Jia said.
Huawei says revenue in first three quarters ‘basically met expectations’ amid intense pressure on global supply chain
The consortium in the Honor deal, which could be announced as early as Sunday, includes the Shenzhen government, according to the Reuters report. It said Digital China, which also partners Huawei in businesses such as cloud computing, will become a top-two shareholder of the sold-off entity, Honor Terminal Co, with a stake of nearly 15 per cent.
The deal will see about 8,000 Honor employees move into new offices in the Futian District of Shenzhen, from Honor’s corporate headquarters in the southern city’s Bantian Subdistrict, according to a report by local media 36Kr. It said Wan Biao, currently the chief operating officer of Huawei’s consumer business group, will join the acquired company.
Honor at present is a major asset for Huawei. By adopting a mainly internet-based distribution model, Honor has generated revenue of more than US$10 billion in the past five years, according to the company.
IDC has estimated that Honor accounted for 28 per cent of Huawei’s total smartphone shipments in the first half of this year, while Strategy Analytics indicated that Honor’s contribution was at 38 per cent in the same period.
