As a result of the US embargo, Huawei has taken a big and decisive step. The company has sold its affordable smartphone division Honor, founded in 2013. For Honor itself, however, this step could turn out to be an advantage.
For about a year and a half, Huawei and subsequently also its subsidiary Honor have been struggling with the US embargo. This prohibits American companies from doing business with the two Chinese manufacturers. The consequences of the dispute between the governments of the USA and China are not only restrictions within some supplier relationships and thus the elimination of some of the important components for chip and smartphone production. Google is also no longer allowed to license new Huawei and Honor smartphones – the devices therefore have to get by without Google apps.
In Europe in particular, sales of high-end smartphones such as the Huawei P40 Pro and the Mate 40 Pro collapsed. As technically sophisticated as the devices are, without known software, the expensive top models in particular are only of interest to a few buyers. Huawei is trying to compensate for the missing Google connection with its own Huawei Mobile Services (HMS). A dedicated app store and dedicated app solutions for navigation, web browsing, etc. have been created. It has so far not helped the sales figures in Europe – an important market for Huawei – but little.
Sale of Honor should ensure the survival of the brand
Apparently the situation is more serious than expected. And so Huawei has now decided to sell its subsidiary Honor. The sale was decided on November 17th, 2020. As soon as the formalities have been completed, Honor no longer belongs to Huawei, but to the Chinese consortium Shenzhen Zhixin New Information Technology Co. It includes over 30 companies and dealers under the leadership of the Shenzhen Smart City Development Group.
As Huawei explains in an official statement, the sale should help Honor dealers and suppliers to get through the difficult times that are currently being experienced. “The reason is that technical elements that are necessary for our smartphone business are not available in the long term,” says Huawei. The sale of Honor ensures the brand’s survival.
Since it was founded in 2013, the Honor brand has focused on the market for more affordable to mid-range smartphones. It appeared more youthful and a little hip than Huawei. Nevertheless, the company was able to take over many of the developments from its big sister.
Honor now sells around 70 million smartphones annually and held a market share of around 15 percent in China in the third quarter of 2020. According to reports, Huawei’s sale of Honor brought in about € 12.1 billion. In return, Huawei parted with any company stake and its say. Around 7,000 employees change to the new owner as a result of the sale and the management team also remains.
Possible consequences of the sale
Since Honor no longer belongs to Huawei due to the sale, the company is no longer affected by the US embargo – at least that is the hopes of both Chinese manufacturers. How the US government will react remains to be seen. Especially in view of the upcoming change of government in your own country.
In the best case scenario, however, Honor could work with US companies again and would have access to supply chains and Google apps again. However, it remains to be seen how Honor will develop as a separate brand after moving away from Huawei. So far, Huawei and Honor smartphones have been very similar to each other due to their closely intertwined relationships. Now Honor would have to realign itself and go its own way. This also includes our own developments in the field of cameras and hardware, which could give upcoming Honor smartphones a very special touch.