Huawei is to sell its Honor smartphone business to a consortium of more than 30 companies, acknowledging that the budget brand needed help to maintain access to vital components and supplies amid a U.S. crackdown.
The move follows increasing US restrictions on supplying Huawei on grounds the firm is a national security threat – which it denies.
Huawei said it will sell all its Honor assets to a newly formed entity dubbed Shenzhen Zhixin New Information Technology Co., Ltd. Huawei will “not hold any shares or be involved in any business management or decision-making activities” once the sale is complete.
The consortium of buyers includes agents and dealers of the Honor brand, as well as many Shenzhen government-backed entities and e-commerce platform Sunning.com Group. China Telling Telecom, a distributor for Huawei, Samsung and Apple smartphones, is also among the buyers. No value was given for the sale.
Huawei admitted the difficulties the business was facing.
“Huawei’s consumer business has been under tremendous pressure as of late. This has been due to a persistent unavailability of technical elements needed for our mobile phone business,” the company said.
“This move has been made by Honor’s industry chain to ensure its own survival,” Huawei said.
By spinning off Honor into an independent entity, Huawei hopes the sub-brand can retain access to vital components to sustain the business. Honor shipped nearly 70 million smartphones in 2019, with China its main market.
A joint statement by the consortium was published in Shenzhen local newspapers on Tuesday:
“This acquisition is a multi-win move for the industry. All shareholders of the new Honor company will fully support the development of the Honor brand, enabling it to leverage the industry’s advantages in resources, brands, production, channels, services, and more effectively to compete in the marketplace.”
“While we will enjoy returns on our financial investments, we will compete fairly for the same business opportunities as other agents and dealers,”
Neither Huawei nor the buyers disclosed the details of the deal, but about 7,000 employees will be moved from Honor to the new company, according to a person familiar with the matter.
Another source added that all qualified suppliers and the procurement system currently serving Honor will remain the same and be transferred to the new company.
