Neither Huawei nor the new owner, Shenzhen Zhixin New Information Technology Co., has revealed the sale price.
Huawei is expected to continue to supply hardware and software services to Honor under license. HONOR, being Huawei's company, has been facing various challenges. Honor shipped almost 70 million smartphones in 2019, with China its main market. A joint statement has been released, by 40 companies that are involved in the purchase. And that should help it with continuing its business - without any partnerships with the US-based companies - which is something that demands a lot of resources. More than 30 agents and dealers of the Honor brand also have a stake in the newly formed Shenzhen Zhixin. This way, Huawei seems to be adapting to the new situation, and is trying to ensure its financial stability.
Do note that this deal includes everything from the company's R&D department, supply chain management, and various other HONOR assets.
Sanctions imposed past year block Huawei's access to most US processor chips and other technology.
The Trump administration has been sanctioning Huawei partly on claims the company's 5G technology represents a spying threat.
In 2019, Honor-branded smartphone sales accounted for 26.4% of Huawei's total phone shipments but faced stiff competition from hometown rivals, including Vivo and Oppo, which have taken over some of its market share since the second quarter of previous year, according to data from research institute IDC. In 2018, it shipped 78 million Honor phones, around 37.9% of its total that year.
The disposal points to Huawei leaning back to its roots as a B2B company, selling equipment and solutions to operators and enterprise, rather than as a consumer play.
Tang was less optimistic about the long term.
Shortly after a report emerged about Huawei considering selling off Honor, the deed has happened. "Spinning off Honor could be a better choice as it can grant the brand an opportunity to avoid the U.S. ban and maintain its smartphone business". With Honor being an independent brand, it can continue to make and launch new smartphones and other devices, without having to worry about the restrictions imposed by the United States. "It will face different market competition than it did in the past".
We read that as meaning Honor will reappear in new form, the brand name in tact - but the products being all-new. "After all, it could be quite risky for the new investors to bid for a business that could face significant uncertainties".
The sale was among the Chinese community, towards another Shenzhen-based company that organized itself particularly for the Huawei deal.
The move to sell Honor - Huawei's budget/mid-range smartphone brand - which is a part of Huawei Consumer Business Group, aims to simplify the equation for Honor going forward. As a Huawei sub-brand, it offers mid-range smartphones focused on younger buyers and online sales channels. Honor, founded in 2013, has been Huawei's flagship mobile manufacturer for years.
The sale is a stunning setback for Huawei, which still ranks as one of the largest smartphone vendors in the world.
Xiaomi has managed to edge Apple out and became the world's third-largest smartphone company in the September quarter.