Huawei sells its budget smartphone brand Honor to ensure survival

The global information and communication provider Huawei Technologies Co. has sold its budget smartphone business Honor to a Chinese government-backed consortium for an undisclosed amount, as the US banned the chip supply to the company.

The consortium formed by the Shenzhen Smart City Technology Development Group Co. with over 30 agents and dealers including private giants like Suning(dot)com Co. to government-affiliated entities such as a branch of China Postal and Telecommunications.

According to the company’s statement, Huawei will not hold any shares in Honor after closing the deal.

“This move has been made by Honor’s industry chain to ensure its survival. Huawei’s consumer business has been under tremendous pressure as of late. This has been due to persistent unavailability of technical elements needed for our mobile phone business,” the company said in a statement.

The budget smartphone has gained immense popularity among the younger population in recent years and even expanded its business to overseas markets like Europe. But it is still unclear if the current Honor spin-off will help to restart the chip supply to its new owners.

Once larger than Samsung Electronics, Honor was a significant part of Huawei’s smartphone business, however, currently, the company is struggling due to a shortage of components and software to continue its production.

Since 2018, the US has rolled out a campaign against Huawei by citing national security concerns and stirred up bans against the use of its 5G equipment in countries from the UK to Japan. Finally, the White House enforced restrictions against suppliers this year, hindering Huawei’s procurement of ready-made semiconductors to continue its business.

As per the report, Shenzhen-based Huawei has stockpiled critical components to secure its telecom equipment business by ensuring continued supply through at least 2021.

In September, the smartphone shipments fell about 22 percent due to the US sanctions, according to research firm IDC. Now the company has to compete to secure its second position against fellow Chinese players from Vivo to Xiaomi Corp., which recorded a 42 percent jump in third-quarter shipments.

Honor is best known as a budget phone brand and doesn’t compete directly with Apple Inc. or Samsung. The Honor-branded phones are sold as low as $137 and go up to around $609.

The most expensive Huawei phones are sold for $2589 surpassing the most expensive iPhone 12 Pro Max. Interestingly, Honor also competes with its parent in a range of consumer electronics from gaming laptops to smartwatches.