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Huawei to sell budget smartphone business for $15bn

Image credit: reuters

According to a Reuters report, Shenzhen-based tech giant Huawei is planning to sell its budget smartphone subsidiary Honor to a consortium led by the government of Shenzhen and Digital China Group.

Honor was established by Huawei in 2013, offering a range of budget-friendly smartphones mostly targeted at young consumers as an alternative to high-end Huawei-branded models. It also sells audio equipment, televisions, laptops, tablets and wearables.

Although wholly owned by Huawei, Honor mostly operates as an independent company.

Huawei has been targeted by severe restrictions introduced by outgoing US President Donald Trump, preventing it from working with unlicensed US companies. Recently imposed restrictions have cut off its access to technology with US origins, such as high-end silicon chips manufactured using extreme-UV etching machinery.

These restrictions have impacted both its enterprise and consumer businesses, including by cutting off its access to sophisticated Kirin 9000 chips manufactured by TSMC using some restricted technologies.

When fully independent from Huawei, Honor will no longer be subject to US sanctions.

People familiar with the deal told Reuters that the all-cash deal will be worth ¥100bn, and will involve the transfer of all Honor assets, including brand, R&D capacity and supply chain management. The deal could be announced as early as this Sunday (15 November).

Under the terms of the deal, Digital China Group – a partner of Huawei in cloud computing and distribution – will become a top-two shareholder in Honor with a stake of nearly 15 per cent. It will be joined by at least three investment companies, each owning 10-15 per cent, backed by the local government of Shenzhen.

Honor will retain most of its management team and workforce and will file an IPO within three years.

Nicole Peng, VP of mobility at Canalys, told Reuters: “It seems a drastic move given the Honor brand has been highly complementary to Huawei’s smartphone portfolio.”

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