Huawei has officially confirmed the sale of Honor smartphone brand to Shenzhen Zhixin New Information Technology Co. Ltd. Earlier this month, a report indicated that Huawei is closer to selling Honor to a conglomerate led by Digital China and Shenzhen government.
Now, the Chinese technology giant has revealed official details of the sale. Huawei had started Honor as an e-brand in 2013. The brand initially focused on budget and mid-range smartphones but has expanded to wearables and laptop segments as well. While Huawei focused on competing with Samsung and Apple, Honor challenged the likes of Xiaomi, OPPO, Vivo and OnePlus.
Huawei sells Honor smartphone brand
With the help of Honor, Huawei managed to dethrone Apple as the second largest smartphone brand in the world. The e-brand also helped the company cement its place as the market leader in China’s smartphone market. Due to market circumstances, Huawei Investment & Holding Co., Ltd. has decided to sell all of its Honor business assets to Shenzhen Zhixin New Information Technology Co. Ltd.
According to a statement shared by Huawei, the new company is formed by over 30 agents and dealers of the Honor smartphone brand. “This sale will help Honor’s channel sellers and suppliers make it through this difficult time,” the company said in a statement.
The deal could be a way for Huawei to isolate Honor from the ongoing battle with the US administration. Last year, the US Commerce Department placed Huawei in its entity list. This restricted US companies like Google from working with Huawei. As a result, Huawei lost access to Google Mobile Services, which impacted its smartphone business in a big way.
Despite the restrictions imposed by the Trump administration, Huawei has managed to shield its network division. However, its smartphone business, which constitutes more than 50 percent of the revenue, is losing market share. According to Canalys, Huawei saw 23 percent decline in smartphone shipments during the third quarter of this year.
This year, the US government imposed further restrictions making it difficult for Huawei to build its own mobile chipsets. The sale announced today could remove Honor from these restrictions. “Once the sale is complete, Huawei will not hold any shares or be involved in any business management or decision-making activities in the new Honor company,” Huawei said in a statement.
Huawei claims Honor sells over 70 million smartphones annually. A report by Reuters had claimed that the new entity will retain most of its management and 7,000-plus workforce. Huawei has not shared the deal value and Shenzhen Zhixin New Information Technology Co. Ltd. has not shared its corporate structure either.
Huawei vs the US administration
There is a possibility that this new company, which owns Honor brand, will ask the US administration to help restore relationships with US companies. This would allow it to launch smartphones with Google Mobile Services and procure smartphone chipsets from Qualcomm. The company will also be able to work with TSMC and procure chipsets from MediaTek.
There is a possibility that Honor will have to wait till the new administration takes charge in the US for this change. For now, it is clear that Huawei has sold Honor to help the brand survive while it fends off new challenges. It is losing 5G contracts in the European and Asian markets and its smartphone business has been on a whirlwind decline.
Huawei had once envisioned to become the leader in the global smartphone market. It was producing flagship smartphones that challenged Samsung and Apple and even excelled in areas like imaging experience. With the help of Honor, it created a strong footprint in the domestic market. Now, Huawei will have to bid adieu to that dream and focus on salvaging the business.