Why Huawei wants to get rid of Honor
Huawei is in talks to sell part of its Honor smartphone business. Running Digital China but also Xiaomi and Tcl
The Shenzen giant wants to get rid of the smartphone business.
Huawei is said to be in talks to sell part of its business linked to the Honor brand, in an agreement with a potential value of 25 billion yuan, about 3.1 billion euros. This was reported by Reuters , citing sources familiar with the dossier.
The Chinese tech giant, which faces heavy US vetoes, wants to focus on its high-end Huawei phones from now on, the sources say.
Huawei founded the Honor brand in 2013, but the business mainly operates independently from its parent company.
THE OPERATION
The sale would involve the Honor brand, a brand of smartphones and other tech products geared towards young people and with lower prices, together with the research and development division and the management activities of the supplier chain.
POTENTIAL BUYERS
Also according to rumors, in pole position for the acquisition there would be Digital China, the main distributor of Honor smartphones. But smartphone manufacturers Xiaomi and Tcl Technology would also be in the running.
THE VALUE OF THE AGREEMENT
According to sources, the agreement would have an economic value of between 15 and 25 billion yuan (between 1.9 and 3.1 billion euros).
FAULT OF US SANCTIONS
The decision to sell would be a consequence of the US sanctions against Huawei, which would have led the Chinese giant to choose to focus on higher-end smartphones and the namesake brand, giving up the business linked to the Honor brand.
The U.S. Department of Commerce in fact put Huawei on the list of U.S. entities in May 2019 . This means that American companies have been banned from doing business with Huawei and can only trade with it if they get special permission from the Trump administration.
HUAWEI FIRST SMARTPHONE MANUFACTURER BEFORE SAMSUNG AND APPLE
We also remember that Huawei overtook Samsung in the second quarter of 2020 , becoming the world leader in smartphone sales. As emerged from the estimate of Canalys, an analysis company specializing in the technology sector. In spite of the long campaign of US pressure against Huawei, the Shenzhen tlc group delivered 55.8 million devices, compared to 53.7 million units of the South Korean rival.
This was the first quarter in nine years that a brand other than Apple or Samsung became the market leader.
THE CONSEQUENCES FROM THE SALE OF HONOR
According to the latest data provided by Canalys analysts, in the second quarter Honor accounted for about a quarter (26%) of Huawei's total sales, with 14.6 million smartphones out of a total of 55.8 million.
The sale of Honor would allow a respite for both Huawei and Honor. Huawei can recover some of the associated costs, allowing Honor and its business to remain in hands that are not affected by US sanctions.
It will also allow the company to better focus on high-end Huawei smartphones, as Honor has broadly marketed itself to demographic groups such as the young and budget-conscious.
A WINNING MOVE ACCORDING TO ANALYSTS
Kuo Ming-chi, an analyst at TF International Securities, argues that any sale by Huawei of the Honor smartphone business would be a win-win situation for the Honor brand, its suppliers and the Chinese electronics industry.
“If Honor is independent of Huawei, its component purchase will no longer be subject to the US ban on Huawei. This will help Honor's smartphone business and vendors, ”Kuo Ming-chi wrote in a statement last week.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/perche-huawei-vuole-sbarazzarsi-di-honor/ on Wed, 14 Oct 2020 08:33:17 +0000.