Huawei prepares to sell Honor unit to Chinese consortium: Reports

The Chinese multinational technology company Huawei plans to sell its budget-brand smartphone unit Honor to a group led by handset distributor Digital China and the government of its home town of Shenzhen in a $15.2 billion deal, sources said.

The move comes as US restrictions on supplying Huawei Technologies pressurized the world’s second-largest smartphone maker, only after South Korea’s Samsung Electronics, to concentrate on high-end handsets and corporate-oriented business, the sources said.

It also shows little hope of any dramatic improvements in Huawei’s perception in the US as a security risk even after a change in the US administration, they said.

Almost all assets, including brand, research & development capabilities and supply chain management, will be included in the all-cash deal as the sources predict that Huawei could announce the deal as early as this week.

The key Honor distributor Digital China Group will become a top-two shareholder of the sold-off entity Honor with a near 15% stake. A corporate registry reveals that Honor Terminal was incorporated in April and is completely owned by Huawei.

Digital China, which also partners Huawei in businesses such as cloud computing, plans to fund the bulk of the deal with bank loans. It will be joined by at least three investment firms backed by the government of financial and technology hub Shenzhen, with each controlling 10 to 15 percent, they said.

Honor plans to retain most of its management team and 7,000-plus staff after the sale and go public within three years, the sources said.

Moves from US administration

Last year, the US government moved to prohibit most homegrown firms from doing business with Huawei, the world’s largest supplier of telecoms equipment, citing national security concerns. Huawei has consistently denied being a threat to security.

In May, Washington announced rules to limit the ability of Huawei to procure chips featuring US technology firms for use in telecommunications network equipment and smartphones of the fifth generation (5G), such as its premium P and Mate series.

Honor

It was in 2013 that Huawei founded Honor, but the company still operates independently. A divestment would mean that Honor is no longer subject to US sanctions for Huawei, analysts said.

Honor sells smartphones in China through its own websites and third-party retailers, where it competes in the market for lower-priced handsets like Xiaomi, Oppo and Vivo. It is also selling its phones in Southeast Asia and Europe.

Honor-brand smartphones made up 26 percent of the 51.7 million handsets Huawei shipped in July-September this year, shows data. Honor’s product range also includes laptops, tablet computers, smart TVs and electronic accessories.