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Chinese tech giant Huawei is selling its Honor smartphone brand at an affordable price in an attempt to save the struggling company from harmful US sanctions imposed on its parent company.
The move announced on Tuesday is intended to revive Honor by separating it from Huawei’s network equipment and other assets, which Washington says poses a security threat, an allegation Huawei denies. They are subject to penalties that block access to most US processor chips and other technologies.
Huawei Technologies’ announcement did not provide financial details, but said the company will have no ownership interest once the sale is complete. Huawei will retain its flagship Huawei smartphone brand.
The buyer is a company formed by a government-owned technology firm in the southern city of Shenzhen, where Huawei is headquartered, with a group of Honor resellers. Previous news reports of rumors of a possible sale have indicated the price as high as 100 billion yuan (about 19.5 billion dollars CDN).
“The move was made by Honor’s industrial chain to ensure its survival,” a Huawei statement said.
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Huawei, China’s first global tech brand, is at the center of tensions between China and the United States over technology, security, and espionage.
American officials say Huawei could facilitate Chinese espionage, which the company denies. They also view Chinese government-backed technological development as a threat to US industrial domination.
US security complaints about Huawei focus on its business of manufacturing switching equipment for telephone and Internet companies and its role as a leader in next-generation telecommunications technology. The Trump administration is lobbying Europe and other allies to ban Huawei and other Chinese suppliers as they update networks.
Meanwhile, Huawei’s chief financial officer Meng Wanzhou, daughter of company founder Ren Zhengfei, is detained in Canada and is fighting extradition to the United States to face charges related to possible violations of trade sanctions against the Iran.
One of the best-selling brands in the world
Sanctions imposed last year block Huawei’s access to most US processor chips and other technologies. These were reinforced this year when the White House banned manufacturers around the world from using US technology to make chips for Huawei, including those designed by their own engineers.
Tuesday’s announcements gave no indication of how Honor’s new owners had planned to regain access to US chips and other technologies, including popular music, maps and other Google services. Other Chinese smartphone brands like Xiaomi, Oppo and Vivo operate without such restrictions.
Honor, founded in 2013, is one of the best-selling smartphone brands in the world. Huawei claims it ships 70 million phones annually.
Total shipments of Huawei and Honor phones fell 5% from the previous year in the quarter ended June to 55.8 million, according to Canalys. Sales to China increased 8%, but overseas shipments fell 27%.
Huawei reported that previous sales for the first nine months of 2020 increased 9.9% to 671.3 billion yuan ($ 132 billion Cdn). It was down from 13.1% growth in the first half, but the company said it was still profitable.
Huawei’s smartphone sales outside of China have suffered as the company has been prevented from pre-installing Google’s services, which many customers have come to expect. Huawei can use Google’s Android operating system because it is open source and does not involve any commercial transaction with the American company.
Huawei says it has removed U.S. components from its core products, but its consumer unit chairman Richard Yu warned in August that the company was running out of smartphone chips.
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