Huawei founder Ren Zhengfei at the company headquarters in Shenzhen, Guangdong province, China. Picture: REUTERS/ALY SONG
Huawei founder Ren Zhengfei at the company headquarters in Shenzhen, Guangdong province, China. Picture: REUTERS/ALY SONG

Huawei Technologies founder Ren Zhengfei called the sale of its Honor budget smartphone division a “clean break” that should free it from US restrictions and create a new powerhouse in the world’s largest mobile arena.

Ren, blasting Trump administration tactics to contain his company, assured employees in a memo that Honor will rapidly resume production after regaining access to American circuitry and software. His missive comes days after Huawei unveiled a deal to sell the business to a consortium of more than 30 Chinese corporations, assembled by government-backed Shenzhen Smart City Technology Development Group.

“Facing wave upon wave of attacks from the US, we finally realised that American officials weren’t trying to fix us. They were seeking to kill us,” Ren said. “Once we’re divorced, there’ll no longer be any under-the-table relations with Honor. We’re handling the separation in an adult manner, and will rigorously adhere to regulations and international norms.”

Huawei’s leader appeared to be addressing uncertainty over whether the spin-off will trigger a resumption of American chip supply to Honor under new ownership or if there are US regulatory steps required first.

Security concerns

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.

Honor 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. Access to US technology will breathe new life into a brand that  has gained popularity among younger budget-conscious users in recent years and made headway in overseas markets such as Europe. It could create a rival to the likes of Xiaomi Corporation and Oppo, who compete in the same price segments.

The sale illustrated the uneven effect 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 telecom equipment business by stockpiling critical components to continue supplying its home country’s 5G rollout through at least 2021.

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

“Under its new leadership, Honor will very quickly resume production and resolve issues affecting its upstream and downstream partners,” Ren said. “The US is a technology superpower that has many excellent companies. You should firmly and boldly work with them.”

Bloomberg

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