In a bid to tackle the huge blows that have come its way ever since the United States’ trade sanctions, Huawei is now planning to sell off its Honor brand of smartphones to suitable bidders, sources close to the matter told Reuters. According to these sources, this deal can be worth up to CNY 25 billion (approx. $3.7 billion).
After being blacklisted in the United States and therefore banned to sell its devices in the country, Huawei faced significant losses in its smartphone business. The sources say that divesting Honor could help the company focus completely on its premium line of smartphones, and make up for the slowdown in business.
Moreover, this might also help the Honor brand, as it could be free of the trade restrictions in the US after a new owner takes over the business.
Kuo Ming-chi, an analyst at TF International Securities, said, “If Honor is independent from Huawei, its purchase of components will no longer be subject to the US ban on Huawei. This will help Honor’s smartphone business and suppliers.”
The frontrunner in this deal is supposed to be the Digital China Group, since it is a major ally and a distributor of Huawei. Chinese electronics maker TCL and smartphone maker Xiaomi are next in line as prospective buyers, said the sources. According to a Chinese tech news blogger, even Gree and BYD are in talks to buy the budget smartphone unit of Huawei. However, nothing has been confirmed as of yet.
The specific assets that will be sold are yet to be finalized but the sources say it could include Honor’s brand, its research & development capabilities and related supply chain management business. One of the sources also said the deal close to worth CNY 25 billion could be an all-cash sale only.
The sources added that if a deal is finalized between Digital China and Huawei for the sale of Honor, then the former would make use of bank loans in the coming weeks to fund most of the deal.
Honor, established in 2011 as a budget smartphone brand by Huawei, competes with the likes of Xiaomi, Oppo and Vivo in the budget smartphone market. Last year, Honor earned CNY 5 billion ($742 million) in net profit out, while the net revenue stood at CNY 80 billion ($11.8 billion).