Huawei sells budget Honor brand as US pressure bites

A domestic consortium led by Shenzhen’s local government said it was necessary to keep the brand alive amid "tremendous" supply-chain pressures caused by US sanctions; the sale will allow the brand to source components without being affected by US restrictions

Huawei sells budget Honor brand as US pressure bites

(ATF) Chinese telecom giant Huawei announced on Tuesday it has sold its Honor budget phone line to a domestic consortium led by Shenzhen’s local government in a move it said was necessary to keep the brand alive amid "tremendous" supply chain pressures caused by US sanctions. 

Honor has been purchased by a group of 40 companies comprised of agents, distributors and other businesses dependent on the brand's survival, Huawei and the consortium said in separate statements.

The value of the deal was not revealed, but earlier media reports estimated it to be 100 billion yuan (US$15 billion). A Huawei spokesperson has declined to confirm the figure.

Huawei, which earlier this year became the world's top mobile phone seller, said its consumer business "has been under tremendous pressure" due to a growing inability to acquire components as the US seeks to cut the company off from the global supply chain.

The sale appears aimed at getting Honor out from under the Huawei umbrella, thereby allowing the brand to source components without being affected by the US sanctions.

"This sale will help Honor's channel sellers and suppliers make it through this difficult time," said Huawei, which is based in the southern Chinese city of Shenzhen.

In a separate statement, the consortium of buyers – Shenzhen Zhixin New Information Technology Co – said the acquisition is “a self-rescue move” and “a market-driven investment” by businesses in Honor’s supply chain.

"It is the best solution to protect the interests of Honor's consumers, channel sellers, suppliers, partners, and employees," they said.

The consortium includes state-owned Shenzhen Smart City Technology Development Group, Shenzhen-listed retail giant Suning.com Group, and distributors Beijing Songlian Technology, Beijing Putian Taili, and China Telling Telecom.

Huawei said it will no longer "hold any shares or be involved in any business management or decision-making activities in the new Honor company".

New leadership

Wan Biao, formerly Huawei consumer business group’s chief operating officer, will join Honor as chairman, and Zhao Ming, formerly Honor’s president, will become chief executive of the new company, Chinese news portal Tencent News said, citing a source close to the situation.

Fang Fei, formerly Huawei Consumer Business Group’s vice president overseeing products, will become Honor’s president for products, and Yang Jian, who headed Huawei Consumer BG’s retail sales in China, will become Honor’s president for global retail sales, the report said.

The new Honor will likely be controlled by Shenzhen’s local government.

According to Chinese business data platform Tianyancha, the consortium - Shenzhen Zhixin New Information Technology Co. - is 98.6% owned by Shenzhen Smart City Technology Development Group, a company wholly-owned by Shenzhen Municipal State-owned Assets Supervision and Administration Commission. 

The other buyers are likely to have joined a Shenzhen government-controlled private equity partnership company that owns the remaining 1.4%, local media said.

'Saving' Honor

The sale is the latest sign that Huawei – also the world's largest supplier of telecoms networking equipment – is being squeezed hard by the US campaign against it.

The administration of President Trump alleges that Huawei has close ties to China's government and military and that the equipment it has installed globally could be used by Beijing for espionage.

Both China's government and the company deny the accusation and say that the United States has never produced any evidence backing up its allegations.

Washington has taken steps to bar Huawei from the US market and prevent US companies doing business with it. It has also moved to cut off its access to global supplies of semiconductors and other components, and pressured other countries to shun Huawei telecom gear.

Huawei officials have said the attacks are motivated more by a US desire to bring down a successful business rival.

The sale of Honor – whose shipments were included in Huawei's overall totals – looks certain to weigh Huawei down in the race with Samsung and Apple to lead world mobile phone sales.

Huawei overtook Samsung as the world's largest mobile phone seller in the second quarter of this year, only to drop back to number two in the third quarter, followed by Apple.

Honor is a line aimed primarily at younger or more budget-conscious buyers and contributes more than 70 million phone sales annually to Huawei's overall totals, according to Huawei.

Huawei sold 51.9 million handsets in the third quarter, according to industry trackers IDC.

In recent weeks, Huawei reported unusually slow revenue growth for the first nine months of the year and Sweden joined the list of European countries banning the use of the company's equipment, though a Swedish court subsequently suspended the ban pending a legal review.

Huawei executive Meng Wanzhou has, meanwhile, suffered a series of legal setbacks in her fight against extradition from Canadato the United States.

Meng was arrested in 2018 on a warrant issued by the United States, where she is wanted on fraud charges related to Huawei violations of US sanctions on Iran.

Her extradition hearings are expected to wrap up in April 2021.

(With reporting from AFP)

Huawei China US-China tensions Honor brand sold Shenzhen govt 100-bn yuan deal local consortium US sanctions