You are here: Home » Technology » News
Business Standard

Huawei in talks to sell parts of its Honor smartphone business: Report

Embattled Huawei is resetting its priorities due to US sanctions and will focus on its higher-end Huawei phones rather than the Honor brand which is aimed at young people and the budget conscious

Topics
Huawei | Honor

Reuters  |  Hong Kong 

Photo: Reuters
Photo: Reuters

Technologies Co Ltd is in talks with Digital China Group Co Ltd and other suitors to sell parts of its smartphone unit in a deal that could fetch up to 25 billion yuan ($3.7 billion), people with knowledge of the matter said.

Embattled is resetting its priorities due to US sanctions and will focus on its higher-end phones rather than the brand which is aimed at young people and the budget conscious, they said.

The assets to be sold have yet to be finalised but could include Honor's brand, research & development capabilities and related supply chain management business, two of the people said.

The deal may be an all-cash sale and could end up smaller, worth somewhere between 15 billion yuan and 25 billion yuan, one of the people said.

Digital China, the main distributor for phones, has emerged as the frontrunner but other prospective buyers include Chinese electronics maker TCL and rival smartphone maker Xiaomi Corp, the people said, declining to be identified as the talks were confidential.

Huawei, the world's biggest telecoms equipment vendor and No.2 smartphone maker, declined to comment as did TCL. Digital China and Xiaomi did not respond to requests for comment.

The Honor brand was established by Huawei in 2013 but the business mostly operates independently from its parent.

'A Win-Win Situation'

Kuo Ming-chi, an analyst at TF International Securities, has said that any sale by Huawei of the Honor smartphone business would be a win-win situation for the Honor brand, its suppliers and China's electronics industry.

"If Honor is independent from Huawei, its purchase of components will no longer be subject to the US ban on Huawei. This will help Honor's smartphone business and the suppliers," he wrote in a research note last week.

The US government last year moved to prevent most US companies from conducting business with Huawei, saying the tech giant was ultimately answerable to the Chinese government. Huawei has repeatedly denied being a national security risk.

In May, Washington announced new rules aimed at constricting Huawei's ability to procure crucial chips that it designs for 5G networking gear and smartphones.

The Honor brand, which sells its phones online through its own sites and via third-party retailers, competes with Xiaomi, Oppo and Vivo in the market for lower-end phones in China. Its phones are also sold in Southeast Asia and Europe.

Honor brand smartphones accounted for 14.6 million, or 26% of the 55.8 million smartphones Huawei shipped in the second quarter of this year, according to estimates from research firm Canalys.

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 last year, said one of the people.

If successful in its bid, Digital China, which also partners with Huawei in cloud computing and other businesses, plans to finance the bulk of deal with bank loans and is set to secure the financing in the coming weeks, the people said.

Shares in Digital China initially rose by their maximum daily limit of 10% but later pared gains to stand 3% higher on Wednesday afternoon, giving the Shenzhen-listed company a market value of around $2.9 billion.
 

Xi vows to gain global lead in tech industry
 
President Xi Jinping vowed to press ahead with plans to gain the global lead in technology and other strategic industries, despite expanding efforts from the US and its allies to check China’s rise. He reaffirmed his commitment to “opening up and reform” as a strategy for gaining economic advantage. Bloomberg

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, October 14 2020. 14:44 IST
RECOMMENDED FOR YOU
RECOMMENDED FOR YOU