EXCLUSIVE – Huawei Sells $ 15 Billion Honor Unit to Shenzhen Government, Digital China and Other Sources

In this news, we discuss the EXCLUSIVE – Huawei Sells $ 15 Billion Honor Unit to Shenzhen Government, Digital China and Other Sources

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Huawei plans to sell the economy-branded Honor smartphone unit in a 100 billion yuan ($ 15.2 billion) deal to a consortium led by digital phone distributor Digital China and its government. hometown of Shenzhen, people with knowledge of the matter told Reuters.

The plan comes as US restrictions on the supply of Huawei Technologies Co Ltd force the world’s second-largest smartphone maker – after Samsung Electronics Co Ltd in South Korea – to focus on high-end handsets and businesses, people said. It also indicates low expectations for a rapid change in the U.S. perception of Huawei as a security risk following a change in U.S. administration, one of the people said.

The cash sale will include almost all assets, including brand, research and development capabilities, and supply chain management, the people said. Huawei could announce it as early as Sunday, one of the people said. Honor’s main distributor, Digital China Group Co Ltd, will become one of the two main shareholders of the divested entity Honor Terminal Co Ltd with an almost 15% stake, two of the people said. Honor Terminal was incorporated in April and is wholly owned by Huawei, the company’s register showed.

Digital China, which is also Huawei’s partner in ventures such as cloud computing, plans to fund most of the deal with bank loans, the two said. He will be joined by at least three government-backed investment firms from the Shenzhen Financial and Technology Center, each holding 10% to 15%, they said. After the sale, Honor plans to keep most of its management team and more than 7,000 employees and go public within three years, the people said, declining to be identified due to confidentiality constraints.

Honor declined to comment. Huawei, Digital China and the Shenzhen government did not immediately respond to requests for comment. PUNISHMENTS

Last year, the US government decided to bar most US companies from doing business with Huawei – also the world’s largest supplier of telecommunications equipment – citing national security concerns. Huawei has repeatedly denied being a security risk. In May, Washington announced rules to restrict Huawei’s ability to source chips featuring U.S. technology for use in fifth generation (5G) telecommunications network equipment and smartphones such as its premium P series and Mate.

Huawei established Honor in 2013, but the company mainly operates independently. The divestment will mean Honor is no longer subject to Huawei’s U.S. sanctions, analysts said. Honor sells smartphones through its own sites Web and third-party retailers in China, where it competes with Xiaomi, Oppo, and Vivo in the low-cost handset market. It also sells its phones in Southeast Asia and Europe.

Honor-branded smartphones accounted for 26% of the 51.7 million handsets delivered by Huawei in July-September, according to estimates by researcher Canalys. Honor products also include laptops, tablets, smart TVs, and electronic accessories. With slim margins for low-end phones, Honor reserved around 6 billion yuan in net profit on sales of around 90 billion yuan last year, one of the people said, citing audited figures. ($ 1 = 6.5775 yuan Chinese renminbi)

News Highlights:

  • Huawei plans to sell the economy-branded Honor smartphone unit in a 100 billion yuan ($ 15.2 billion) deal to a consortium led by digital phone distributor Digital China and its government. hometown of Shenzhen, people with knowledge of the matter told Reuters. The plan comes as US restrictions on the supply of Huawei Technologies Co Ltd force the world’s second-largest smartphone maker – after Samsung Electronics Co Ltd in South Korea – to focus on high-end handsets and businesses, people said.
  • EXCLUSIVE – Huawei Sells $ 15 Billion Honor Unit to Shenzhen Government, Digital China and Other Sources
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