(Reuters) – China’s Huawei Technologies Co Ltd is in the early stages of negotiations to sell its premium smartphone brands P and Mate, said two people with direct knowledge of the issue, a move that could lead the company out of the smartphone from a high class -production business.
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According to one source, Huawei began an internal study of the possibility of selling the brands last September. Both sources were not aware of Huawei’s brand assessment.
Mate and P series phones shipped $ 39.7 billion between Q3 2019 and Q3 2020, according to consulting firm IDC.
However, Huawei has not yet made a final decision on the sale, and negotiations may not be successful, according to both sources, as the company is still trying to produce at home its high-end Kirin internally designed chips that power smartphones.
“Huawei has learned that there are unfounded rumors about the possible sale of our leading smartphone brands,” said a Huawei spokesman. “There is no merit for these rumors. Huawei has no such plan. “
The Shanghai government said it was unaware of the situation and declined to comment further.
The potential sale of Huawei’s premium smartphone lines suggests that the company has little hope that the new Biden administration will change its mind about the supply chain restrictions placed on Huawei from May 2019, the two said.
Investment firms backed by the Shanghai government could form a consortium with Huawei dealers to take on the P and Mate brands, according to the second person, a similar model of the Honor deal. Huawei will also likely retain its existing P & Mate management team for the new entity if the deal is completed, the two said.
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Huawei, the largest supplier of telecommunications equipment and smartphone maker №2, announced last November the sale of its budget brand Honor to a consortium of 30 dealers led by a company backed by the Shenzhen government.
The second source states that the sale of all money has reached over 100 billion yuan ($ 15.5 billion). Honor declined to comment.
The sale of Honor was intended to keep the budget brand alive, as sanctions imposed on Huawei by the United States disrupted the unit’s supply chain and cut off the company’s access to key hardware such as chips and software such as Alphabet Inc.’s Google Mobile Services.
Huawei may have a similar goal in pursuing the sale of mobile brands. Both sources said Huawei’s latest plans for the two high-end brands were motivated by insufficient chip supplies.
Washington says Huawei is a threat to national security, which Huawei has repeatedly denied.
On Friday, Honor said the spin-off goal had been achieved by announcing it had partnered with chipmakers such as Intel and Qualcomm and launched a new phone.
Last year, Richard Yu, CEO of Consumer Business Group, said US restrictions meant Huawei would soon stop making Kirin chips. Analysts expect chip stocks to run out this year.
Huawei’s HiSilicon division relies on software from US companies such as Cadence Design Systems Inc. or Synopsys Inc. to design its chips and outsources production to Taiwan Semiconductor Manufacturing Co. (TSMC), which uses equipment from US companies.
The P and Mate series are among the best players in the high-end smartphone market in China and compete with Apple’s iPhone, Xiaomi Corp’s Mi and Mix series and OPPO’s Find series.
The two brands contributed nearly 40% to Huawei’s total sales in the third quarter of 2020, according to market research firm Counterpoint.
Analysts have recently noted the insufficient supply of the leading P40 and Mate40 series due to a serious shortage of components.
“We expect a steady decline in sales of the P and Mate series smartphones in the first quarter of 2021,” said Flora Tang, an analyst at Counterpoint.
Report by Julie Zhu, Inji Ian and David Kirton, Additional Reporting by Brenda Goch; Edited by Sumeet Chatterjee & Shri Navaratnam