World’s biggest telecom equipment vendor and second-biggest smartphone manufacturer, Chinese technology giant Huawei Technologies Co Ltd is in talks with Digita China Group Co Ltd and other companies to sell part of its Honor smartphone business unit, in order to streamline the business. The deal could fetch up to $3.7 billion for Huawei, at that too at a time, when the company is facing troubles across the world for bans on its operations and business over spying issue.
Huawei formed the Honor brand back in 2013 but the business mostly operates independently from its parent group.
Huawei is currently in the process of resetting its priorities due to the US sanctions. The company is now focusing on high-end Huawei smartphones instead of Honor brand that targets the young and budget-conscious consumers.
The deal could include Honor’s brand, research & development capabilities along with the related supply chain management business. It could be an all-cash sale.
Digital China’s name has been surfaced as the frontrunner among the prospective buyers for the Honor brand. Other prospective buyers include the TCL, Xiaomi Corp etc.
Digital China is in partnership with Huawei for cloud computing and other businesses. The company plans to finance the bulk of the Honor deal with bank loans and set to secure the financing in the coming weeks, as reports suggest.
With this deal, Honor could see a silver line in the US market, as it would be independent and owned by another company which is out of the US sanction. This will certainly help Honor’s smartphone business and suppliers in the US market. Hence, the deal could bring a win-win situation for the Honor brand, its suppliers and China’s electronics industry as well.
In 2019, the US Government prevented most of the US companies from doing business with Huawei, alleging that the tech giant’s equipment could prove to be a national security risk for the country. However, Huawei has repeatedly denied the allegations.
Due to these sanctions, Huawei’s supply chain, especially the chip procurement system took a hard hit.
The Honor brand
Honor sells its smartphones online through its own website and via third-party retailers as well. The brand competes with other Chinese companies like Xiaomi, Oppo and Vivo for the lower-end phones in China. Also, Honor has a strong consumer base across Southeast Asia and Europe as well. India is one of the key markets for the Honor smartphones.
The company also sells other tech consumer goods like smart bands.
The Honor accounted for 14.6 million or 26% of the 55.8 million smartphones Huawei shipped in the second quarter of 2020, as research firm Canalys estimates.