The Huawei logo is seen at the IFA consumer technology fair in Berlin, Germany, September 3 2020. Picture: REUTERS/MICHELE TANTUSSI
The Huawei logo is seen at the IFA consumer technology fair in Berlin, Germany, September 3 2020. Picture: REUTERS/MICHELE TANTUSSI

Huawei Technologies sold its Honour smartphone business to a Chinese government-backed consortium for an undisclosed amount, hiving off the entry-level devices arm after the Trump administration cut off its access to US technology.

The consortium was formed by the Shenzhen Smart City Technology Development Group  and more than 30 of Honor’s partners, agents and dealers, from private giants such as Suning.com  to government-affiliated entities such as a branch of China Postal and Telecommunications. Huawei will no longer hold any shares in Honour after the transaction.

The deal could help augment a brand that has gained popularity among younger budget-conscious users in recent years and made headway in overseas markets such as Europe. It is unclear if the Honour spin-off will lead to a resumption of American chip supply to its new owners. Shares in rival smartphone maker Xiaomi slid as much as 6% on Tuesday in Hong Kong.

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

Honour was an integral part of Huawei’s smartphone business, once larger than Samsung Electronics’s but now struggling to secure enough crucial components and software for production. The sale illustrates the uneven impact of White House sanctions on China’s largest technology company, whose consumer business is ailing even as its networking unit soldiers on. Shenzhen-based Huawei is said to have safeguarded its core telecoms equipment business by stockpiling critical components to continue supplying its home country’s 5G rollout through at least 2021.

Citing national security concerns, the US has waged a far-ranging campaign against Huawei since 2018 that landed its CFO under house arrest in Canada and fomented bans against the use of the company’s 5G equipment in countries from the UK to Japan. The final blow came when the White House enacted sweeping restrictions against suppliers this year, closing off loopholes that let Huawei procure ready-made semiconductors to keep its consumer business afloat.

Huawei’s smartphone shipments plummeted 22% in the September quarter because of the US sanctions, according to research firm IDC. It now has to defend its No 2 position against fellow Chinese players from Vivo to Xiaomi, which recorded a 42% jump in third quarter shipments, data from IDC show.

Honour has been operating as a budget phone brand alongside mainstream phones such as the Mate series, and does not compete directly with the best offerings from Apple or Samsung. Honour also competes with its own parent in a range of consumer electronics from gaming laptops to smartwatches.

Honor’s other new owners include local corporations such as Shenzhen Expressway and Shenzhen Energy. It can lean on Suning, the country’s largest electronics chain backed by Alibaba Group Holding, to help enhance distribution.

“The change in ownership will not impact Honor’s development direction or the stability of its executive and talent teams,” the company said in a statement to local newspapers. “It is the best solution to protect the interests of Honor’s consumers, channel sellers, suppliers, partners and employees.”

Bloomberg

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