BEIJING (AP) – Chinese tech giant Huawei is selling its budget-priced Honor smartphone brand in an effort to protect the business that is struggling to harm US sanctions imposed on its parent company.
The sale, announced Tuesday, aims to revive Honor by separating from Huawei’s network equipment business, which Washington says is a threat to security, Huawei alleges. It is under restrictions that prevent access to most US processor chips and other technology.
Huawei Technologies Limited’s announcement did not provide any financial details, but said that the company would not have any ownership stake after the sale was completed. Huawei will retain its flagship Huawei smartphone brand.
The buyer is a state-owned company in Shenzhen, where the southern city of Huawei is headquartered, and a group of Honor retailers. Earlier reports on rumors of a possible sale pushed the price to a high of 100 billion yuan ($ 15 billion).
Huawei’s statement said that Honor’s industry chain has taken this step to ensure its survival. Byers said in a separate statement that the division was the “best solution” to protect customers and employees.
Huawei, China’s first global tech brand and the largest company to make switching devices used by phone and Internet companies, is at the center of US-Chinese tension over technology, security and espionage. The tussle has spread to include the popular Chinese-owned video app TikTok and the messaging service WeChat.
Economists and political analysts expect very little change in US policy towards China under President-Elect Joe Biden due to widespread frustration with Beijing over trade and technology.
Huawei appears to be preparing for hard times by focusing its resources on its high-end smartphones, said Canal’s Nicole Peng.
The sale “is definitely a sign of weakness,” said Nicole Peng of Canal.
“It shows that Huawei knows that the situation between China and the US will not change immediately,” Peng said.
Tuesday’s announcements gave no indication of how Honor planned to gain access to America’s chips and other technologies, including Google’s popular music, maps, and other services. Other Chinese smartphone brands such as Xiaomi, Oppo and Vivo operate without any restrictions.
“In theory, the honor will be like any other Chinese OEM (manufacturer),” said IDC’s Kiranjit Kaur in an email. However, he said that Honor needed time to restore access to suppliers and establish its own research and development.
“The challenge remains how soon she breaks away from her dependence on Huawei and has access to all related technology,” Kaur said.
US security complaints focus on Huawei’s network gear and leading role in next-generation telecommunications technology.
US officials say that Huawei may facilitate Chinese espionage, which the company denies. They also see Chinese government-backed technology development as a threat to American industrial dominance. The Trump administration is lobbying European and other allies to exclude Huawei and other Chinese suppliers as they upgrade the network.
Meanwhile, Meng Wenzhou, chief financial officer of Huawei, the daughter of company founder Ren Zhengfei, is arrested in Canada and is fighting extradition to the United States to face charges related to possible violations of trade sanctions on Iran.
Sanctions imposed last year blocked Huawei’s access to most American processor chips and other technology. Those were tightened in May when the White House barred manufacturers around the world from using American technology to produce chips for Huawei, including ones designed by its own engineers.
The buyer is Shenzhen Zhixin New Information Technology Company. It was founded by the Shenzhen Smart City Technology Development Group Company, which was formed by the city government to develop the information technology infrastructure.
Search engine Baidu, Inc. According to Akihaha, the financial information service of the country, smart city company Zyxin owns 98.6%. The buyer statement said that the remaining 40-member investment group comprises the Honor retailers.
Honor, founded in 2013, is one of the world’s best-selling smartphone brands. Huawei says that it ships 70 million handsets a year.
According to Canvas, total shipments of Huawei and Honor handsets fell 5% to 55.8 million in the quarter ended June from a year earlier. Sales in China rose 8% but shipments abroad fell by 27%.
Huawei previously reported that total revenue in the first nine months of 2020 increased by 9.9% to 671.3 billion yuan ($ 100.4 billion). This was down from 13.1% growth in the first half, but the company said it was still profitable.
Sales of Huawei’s smartphones outside China have declined as the company has been barred from preinstalling Google services, which many customers expect. Huawei is allowed to use Google’s Android operating system because it is open source and does not involve any commercial transactions with the US company.
Huawei says it has removed American components from its core products, but Richard U, president of its consumer unit, warned in August that the company was running out of chips for smartphones.
The Peng of Canalis stated that Honor may be able to establish suppliers before the new US administration is created. He said Honor is likely to reduce security concerns as it will be smaller than Huawei and has no role in next-generation infrastructure.
“It is less likely to become a target of the US government,” she said.
Hsu reports from Hong Kong