Huawei selling budget smartphone brand to focus on high-end phones

Ruben Fields
October 16, 2020

The Chinese giant is in talks with Digital China Group to sell parts of Honor, its low-end, budget phone unit for 15-25 billion yuan ($2.2-3.7 billion), Reuters reported on Wednesday. This marks the end of Huawei's promising run it made with its sub-brand Honor focused on bringing great budget smartphones and other devices.

It's still unclear which parts exactly Huawei wants to sell, but Reuters' sources say that they could include "Honor's brand, research & development capabilities, and related supply chain management business".

Since its founding in 2013, Honor has played a key role in Huawei's rise to the top of the smartphone industry. Should it be true and successful, the deal could go up to 25 billion Yuan (~RM15.4 billion). The company Digital China, which has been the main distributor of the Honor devices so far, is now said to be the most promising candidate.

Nevertheless, the brand could serve as a solid earner for Digital China, Xiaomi, or TCL. All that said, there's no room for the Honor brand anymore, at least not as long as it stays in Huawei's hands.

Europe is now Huawei's largest market outside China but the world's biggest smartphone maker has been placed on a U.S. trade blacklist that cuts off access to US-origin technology - including chips and Google's Android operating system, which houses popular western apps such as Gmail and YouTube.

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Earlier this month, noted Apple analyst Ming-Chi Kuo predicted that Huawei may sell off the Honor smartphone business in order to disentangle that brand from the effect of the U.S. sanction. "This will help Honor's smartphone business and the suppliers", he wrote in a research note last week.

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. Its phones are also sold in Southeast Asia and Europe.

Among the potential buyers is Digital China Group, the main distributor for Honor phones. Past year they managed to become the second biggest smartphone maker in the world.

Huawei, which faces heavy sanctions in the U.S., wants to step away from developing its low-priced Honor phones and instead concentrate on high-end Huawei devices, according to people familiar with the matter.

Digital China reportedly plans to finance the purchase with bank loans in coming weeks.

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