About a month ago, reports out of China stated that Huawei might sell off its Honor subsidiary to help it continue operations without the sanctions. New developments suggest that the deal has indeed gone through.
Chinese media outlets claim (opens in new tab) that the decoupling is in the final stages and the official announcement will come around November 20. The independent Honor is said to be owned by a newly-formed joint venture between several top mobile phone distributors in China — Putian, Tianyin, China Post, Aishide, etc., and an investment company with a background of Shenzhen SASAC.
The acquisition cost isn’t mentioned, but it is expected to be in the range of 15-25 billion yuan, which approximately equals $2.2 billion to $3.7 billion. The state-owned company is also aiming for an IPO in three years.
According to sources, Huawei has sold Honor smartphone unit to a newly established state-owned JV, aiming for an IPO in 3 years.The prerequisites of the acquisition is that the new company can buy and use 5G chips. An official announcement of the deal will be made around Nov 20. pic.twitter.com/KipBu3SotRNovember 8, 2020
The biggest advantage of the deal is that Honor could once again have direct trade relations with American companies, allowing it to source chipsets from Qualcomm and have access to full-fledged Android, among others. Since the sanctions are on Huawei (which includes Huawei Consumer Business Group and Huawei Enterprise also), a split should help Honor subvert those. The deal is also said to include the entire employee base, research and development and the related supply chain, so the new owner would not have to start from scratch.
The split will also let Huawei focus on the high-end market and telecom equipment, rather than pursue slimmer profits that affordable Honor phones chase. Ming-Chi Kuo, one of the most reliable analysts in the consumer tech space, also suggests that the deal will be a “win-win situation” for the brands as well as the suppliers.
A report from Reuters (opens in new tab) also mentioned that Digital China, the main distributor of Honor devices, TCL and Xiaomi were also interested in buying Honor. Huawei has remained mum over the speculations, but it shouldn’t be long till we get some clarity on the restructuring.
We’ve approached Honor India for a statement on this development and will update the story accordingly.