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November 17, 2020updated 18 Nov 2020 4:51pm

Huawei sells Honor brand due to “tremendous pressure” from US sanctions

By Ellen Daniel

Chinese smartphone maker Huawei has announced it is selling budget smartphone brand Honor.

Huawei said that “a persistent unavailability of technical elements” had put the brand under “tremendous pressure”. This forced the decision to sell Honor’s business assets to Shenzen Zhixin New Information Technology, a consortium backed by the government of Shenzen, China.

Founded in 2013, Honor sells low to mid-range devices intended for younger consumers exclusively online and through third-party retailers. Honor produces a range of smartphones as well as laptops, wearable devices, televisions and earphones.

In a statement, Huawei said it hopes the sale will help Honor’s channel sellers and suppliers “make it through this difficult time”.

Huawei has said it will not hold any shares or be involved in any business management or decision-making activities related to Honor once the deal has gone through.

Although numbers have not been disclosed, according to Reuters the deal may have been worth around $15.2bn.

Huawei has been subject to US sanctions, with the country imposing new restrictions on US chip manufacturers, as well as foreign manufactures that use US technology, providing products to Huawei in August. This has impacted the company’s ability to access vital components for its smartphones and other devices, including those produced by Honor.

Last month, Huawei announced its Q3 results, with the company reporting revenue increases of 9.9% year-on-year. However, it said that due to Covid-19 its global supply chain had been put under “intense pressure” with its production and operations facing “significant challenges”.

Ben Wood, chief of research at CCS Insights said that the deal could enable Honor to re-establish ties with western companies and suppliers and that Huawei had “few other options”.

“There has been endless speculation that Huawei would divest Honor, so it is an important step that this is now official,” he said. “However, at this stage, there is a distinct lack of details on the next steps making it hard to understand what direction the new business will take and how it will recover. We assume that the goal will be for the new independent company to re-establish ties with Google and component suppliers.”

However, he said it remains to be seen how the brand will fare in the competitive market:

“At its peak, Honor was shipping 70 million phones annually. Given its historic dependence on Huawei for product development and scale it will be interesting to see whether an independent entity will be able to recover.

“The Honor brand was historically focussed on mid and low-tier devices targeted at younger customers. This is one of the most competitive Android smartphone product segments so this new version of Honor will need to work hard to compete with rivals such as Realme and Xiaomi who have been aggressively focused on this market opportunity as Honor sales have declined.”


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