Update: Former chief executive of Honor Zhao Ming becomes CEO of 'new' company after sub-brand sold by Huawei

By Chen Qingqing and ShenWeiduo Source: Global Times Published: 2020/11/17 8:12:56

Photo: VCG

Chinese tech giant Huawei Technologies sold its sub brand Honor to a Chinese consortium of over 30 agents and dealers, a joint decision made by Honor's whole supply chain to ensure its survival amid escalating US sanctions. It is also seen as "unprecedented, stirring self-rescuing" move by Chinese tech firms as they face an unreasonable political crackdown, according to industry analysts.

The Joint Statement

The statement was made following market rumors about the deal that have been circulating for days. Selling off its low-end phone line is considered a major decision enabling the tech giant - the second-largest smartphone vendor worldwide - to ease the impact of the US crackdown.

The sale will include all assets of Honor. Once the acquisition is complete, Huawei will not hold any shares in the "new" Honor company.

The buyers of Honor are led by Shenzhen Zhixin New Information Technology Co, jointly founded by state-owned Shenzhen Smart City Technology Development Group Co, in addition to Huawei's other long-term agents and dealers along its industrial chain, including Beijing Songlian Technology Co.

The deal represents "a market-driven investment made to save Honor's industry chain," the buyer's joint statement said.

All shareholders of the new Honor company will fully support the development of the Honor brand, enabling it to leverage the industry's advantages in resources, brands, production, channels and services and more effectively complete in the marketplace.

The statement did not disclose the amount of the deal. 

Zhao Ming, chief executive of Huawei's Honor handset line, will become the CEO of the "new" Honor firm after the sub-brand was stripped from Huawei, Honor confirmed to the Global Times on Tuesday. The Global Times also found out that Zhao has updated his introduction on Sina Weibo, China's twitter-like social media platform, to be the CEO of Honor Limited.

Previously, media reports saying Wan Biao, chief operating office of Huawei's consumer business group, would chair the new company, while He Gang, chief of Huawei's smartphone business division, would be the chief operating officer. 

When asked for confirmation, Honor said other management team members have yet to be confirmed.

This move is also seen as an all-out effort in the supply chain to save a growing domestic brand, which is akin to "cutting off its arm to save its body," some analysts said, as Huawei's lower-end smartphone business has been facing tremendous pressure from the US in relation to chipset bans and technology restrictions.  

Huawei also said in a statement on Tuesday morning that its "consumer business has been under tremendous pressure." It decided to sell all of its Honor business assets to Shenzhen Zhixin New Information Technology Co, which will help Honor's channel sellers and suppliers make it through this difficult time.

"This move has been made by Honor's industry chain to ensure its own survival. Over 30 agents and dealers of the Honor brand first proposed this acquisition," the statement said.

Previous media reports said the sale included the brand, research and development (R&D) capabilities, supply chain management and its 8,000 staffs. In addition to its smartphone business, Honor also makes tablets, laptops and wearable devices. 

In the third quarter of 2020, Huawei shipped 51.7 million units of smartphones, and Honor phones accounted for 26 percent of them, according to media reports, citing market research firm Canalys. 

Infographic: GT

Given the low profits of lower-end smartphones, Honor recorded a total revenue of about 90 billion yuan in 2019, with net profits of some 6 billion yuan. Honor brand's revenue accounted for between 15 to 17 percent of the total revenues of Huawei's consumer business group and about 8 to 9 percent of the company's total revenue.

As a result, the sell-off won't have a significant impact on Huawei's bottom line, according to some analysts. 

"It is unfortunate, but a very logical move to salvage the business for its fast growing Honor line of business," Neil Shah, a veteran analyst at Counterpoint, told the Global Times on Tuesday. The deal is believed to help Honor maintain its market share in China, Shah noted. 

More importantly, the selling-off of Honor will help ease the pain of the US chipset ban on Huawei, as the company has been facing difficulties accessing high-end Kirin series chipsets. Honor smartphones have used fewer Kirin chipsets, and the ban has cast a shadow over its new product launches and supply, industry analysts said. 

It's likely that the sale will enable Honor to use US affiliated technology and software such as Google, and there's also a possibility that Honor can regain shares that Huawei lost in its overseas market, analysts noted.

The deal involving Honor's management team also shows the brand was not 'abandoned,' as the board of the new company is made up of "Huawei people" to some extent, Ma Jihua, a veteran industry analyst and close follower of Huawei, told the Global Times on Tuesday. 

Some industry experts said Honor's transparent ownership will clear doubts of the US government, enabling it to avoid sanctions like other Chinese smartphone vendors Xiaomi and OPPO.

As an independent company, Honor may also worry the world phone industry - as it will firstly directly impact its Chinese smartphone competitors such as Xiaomi, Oppo, and Vivo, and Samsung's low- and middle-end products may also be hit one day, Xiang Ligang, director-general of the Beijing-based Information Consumption Alliance, told the Global Times. 

Posted in: COMPANIES

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