Huawei to sell its $15 billion Honor unit to Shenzhen government, Digital China

Huawei Technologies

Huawei plans to sell budget-brand smartphone unit Honor at a 100 billion yuan (approximately $15.2 billion) deal to a consortium led by handset distributor Digital China and the government of its home city of Shenzhen, individuals with knowledge of the matter have told journalists at our partner news agency Reuters.

The program comes as US limitations on supplying Huawei Technologies induce the planet’s second-biggest smartphone maker – after Samsung Electronics – to concentrate on high-end handsets and corporate-oriented company, the people said.

Additionally, it suggests little expectation for any rapid change in the US perception of Huawei as a safety risk after having an alteration in US government, among the people said.

The all-cash sale will include virtually all assets such as brand, research & development capacities and supply chain management, the people said. Huawei can announce it as early as Sunday, one of the people said.

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Honor Terminal was integrated in April and is fully possessed by Huawei, the corporate registry revealed.

Digital China, which also partners Huawei in businesses like cloud computing, plans to fund the majority of the deal with bank loans, the 2 people said. It’ll be joined by at least three investment businesses backed by the government of financial and technology hub Shenzhen, with each owning 10% to 15%, they said.

Following the purchase, Honor intends to retain most of its management team and 7,000-plus workforce and also move public in three years, the folks said, declining to be identified because of confidentiality constraints.

Huawei, Digital China and the Shenzhen authorities did not immediately respond to requests for comment.

SANCTIONS

The American government last year moved to stop most US companies from conducting business with Huawei – also the world’s biggest telecoms equipment vendor – citing national security issues.

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In May, Washington declared rules aimed at constricting Huawei’s ability to procure chips comprising US technologies to be used in fifth-generation (5G) telecommunications network gear and smartphones such as its premium P and Mate series.

Huawei established Honor in 2013 but the company largely operates independently. Divestment will mean Honor is no more subject to Huawei’s US sanctions, analysts said.

Honor sells smartphones through its websites and third party retailers in China in which it competes Xiaomi, Oppo and Vivo from the marketplace for lower-priced handsets. It also sells its phones in Southeast Asia and Europe.

Honor-brand smartphones made up 26% of those 51.7 million handsets Huawei shipped in July-September, showed estimates from researcher Canalys. Honor’s products also include notebooks, tablets, smart TVs and electronic accessories.

With margins thin for lower-end phones, Honor booked about 6 billion yuan in net profit on revenue of around 90 billion yuan this past year, said among those people, citing audited figures.

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The team at Platform Executive hope you have enjoyed this news article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Julie Zhu. Additional reporting by David Kirton. Editing by Christopher Cushing.

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