Huawei has reportedly agreed to sale its Honor smartphone subsidiary to a Chinese consortium that includes handset distributor Digital China and firms backed by the local government in Shenzhen.
Speculation last month suggested Huawei was considering a sale of part of Honor in a deal worth up to £2.9 billion, however it is now suggested a deal worth £11.5 billion has been struck to dispense of the entire business.
Honor was launched by Huawei in 2013 and targets budget-conscious consumers with feature-packed, affordable devices. It competes with other Chinese vendors Oppo, Vivo and Xiaomi in the Chinese mid-range market and has expanded to other countries in Asia and Europe.
Huawei Honor sale
Given Honor currently accounts for around a quarter of Huawei’s global shipments, a sale would end the firm’s ambition of being the world’s largest smartphone maker having been neck and neck with Samsung for the past few months.
However, Huawei is said to have revised targets and is reassessing its priorities following the imposition of US sanctions that have severely limited its access to key technologies. It now wants to use its available resources to pursue the high-end market rather than the thin margins that Honor chases in the budget space.
After a sale, Honor would also be free of US restrictions and more able to compete in the mid-range market. It largely operates independently from its parent, pushing its own branding and product strategy. This includes distribution channels and research and development operations.
As the main distributor of Honor handsets, Digital China would suffer from any threat to Huawei’s business. It is providing the bulk of the financing for the takeover.
The all-cash sale could be announced as early as Sunday and is said to include virtually all of Honor’s assets, with the firm retaining most of its management team and 7,000 staff. There is also a plan to go public within three years.
Huawei has been contacted for comment.