Besieged by USA tech sanctions, Huawei could also be trying to shake up its smartphone enterprise that has taken successful after dropping core semiconductor components and software program providers.
Even though the assets that will be sold haven't been finalized yet, Huawei is likely to sell Honor's brand, R&D capabilities, as well as the supply chain management business.
It can be said that it is remarkable that the name of Xiaomi, one of the most important competitors of Huawei in the global smartphone market, is mentioned among potential buyers. By the way, Digital China is the main distributor for HONOR phones so it's now the preferred choice, whereas other tech brands like TCL and Xiaomi are also said to be involved.
The conglomerate offers its premium core products to fans of Apple's iPhones and Samsung's Galaxy S series. The Honor sub-brand, which was launched in 2013, is mainly targeted at value-conscious consumers. The unit's online-centric retail model and promotional partnership with celebrities like PewDiePie have resonated with younger buyers.
But margins for lower-end phones can be razor thin, and Honor booked less than 5 billion yuan in net profit on revenue of about 70-80 billion yuan a year ago, said one of the people. Honor phones are also available in Southeast Asia and Europe.
Huawei can no longer find a sustainable way to maintain Honor's business prospects.
Despite the relative popularity, the division's products are not particularly profitable due to their affordability.
However, Honor posted less than 5 billion yuan in net profit out of up to 80 billion yuan revenue a year ago.
Nevertheless, the brand could serve as a solid earner for Digital China, Xiaomi, or TCL.
Seems like Huawei is keen to make some serious decisions for its smartphone business.
Europe is now Huawei's largest market outside China but the world's biggest smartphone maker has been placed on a U.S. trade blacklist that cuts off access to US-origin technology - including chips and Google's Android operating system, which houses popular western apps such as Gmail and YouTube.