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Huawei sells Honor brand phones before US sanctions

BEIJING (AP) – Chinese technology giant Huawei is selling its budget brand Honor for smartphones in an attempt to save the troubled business from damaging US sanctions imposed on the parent company.

The sale, announced Tuesday, is intended to revive Honor by separating it from Huawei’s network equipment business, which Washington says poses a security threat, Huawei denies. Sanctions block access to most processor chips in the United States and other technologies.

In a statement from Huawei Technologies Ltd. no financial details are given, but it is said that the company will not have a stake after the sale is completed. Huawei will keep its leading smartphone brand Huawei.

The buyer is a state-owned company in Shenzhen, the southern city where Huawei is headquartered, and a group of Honor retailers. Earlier news reports of rumors of a possible sale put the price at up to 1

00 billion yuan ($ 15 billion).

“The move was made by Honor’s industrial chain to ensure its own survival,” Huawei said in a statement. Buyers said in a separate statement that separation was the “best solution” to protect customers and employees.

Huawei, China’s first global technology brand and the largest maker of switching equipment used by telephone and Internet companies, is at the center of US-China tensions over technology, security and espionage. The feud spreads to include the popular TikTok video app and China-owned WeChat messaging service.

Economists and political analysts expect a small change in US policy toward China under President-elect Joe Biden due to widespread frustration with Beijing over trade and technology.

Huawei seems to be preparing for tough times by focusing its resources on its high-end smartphones, said Nicole Peng of Canalys.

The sale is “definitely a sign of weakness,” said Nicole Peng of Canalys.

“This shows that Huawei knows that the situation will not change immediately between China and the United States,” Penn said.

Tuesday’s reports did not show how Honor plans to regain access to US chips and other technologies, including popular music, maps and other Google services. Other Chinese smartphone brands such as Xiaomi, Oppo and Vivo work without such restrictions.

“In theory, Honor would be like any other Chinese OEM (manufacturer),” Kiranjeet Kaur of IDC said in an email. However, he said Honor needed time to restore access to suppliers and create its own research and development.

“The challenge remains how quickly it separates from its dependence on Huawei and gains access to all relevant technologies,” Kaur said.

Security complaints in the United States focus on Huawei’s network facilities and its leading role in next-generation telecommunications technology.

U.S. officials say Huawei could facilitate Chinese espionage, which the company denies. They also see the technological development supported by the Chinese government as a threat to US industrial dominance. The Trump administration has lobbied European and other allies to shut down Huawei and other Chinese suppliers as they upgrade their networks.

Meanwhile, Huawei’s chief financial officer, Meng Wangzhou, the daughter of the company’s founder Ren Jenffei, has been arrested in Canada and is fighting extradition to the United States to face charges of possible violations of trade sanctions against Iran.

Sanctions imposed last year blocked Huawei’s access to most US processor chips and other technologies. They were tightened in May when the White House banned manufacturers around the world from using American technology to produce chips for Huawei, including those designed by its own engineers.

The buyer is Shenzhen Jixing New Information Technology Co. It was founded by Shenzhen Smart City Technology Development Group Co., which was formed by the city government to develop information technology infrastructure.

Smart City owns 98.6% of Zhixin, according to Aiqicha, a financial information service from search engine Baidu, Inc. The buyers’ statement said the rest of the 40-member investment group included Honor retailers.

Honor, founded in 2013, is one of the best-selling smartphone brands in the world. Huawei says it supplies 70 million phones a year.

Total shipments of Huawei and Honor phones fell 5 percent from a year earlier in the quarter ending in June to 55.8 million, according to Canalys. Sales in China increased by 8%, but shipments abroad decreased by 27%.

Huawei previously reported total revenue for the first nine months of 2020 rose 9.9% to 671.3 billion yuan ($ 100.4 billion). It was a 13.1% drop in the first half, but the company said it was still profitable.

Sales of Huawei smartphones outside China have suffered as the company is banned from pre-installing Google services, which many customers expect. Huawei is allowed to use Google’s Android operating system because it is open source and does not involve commercial transactions with the US company.

Huawei said it had removed US components from its core products, but its consumer unit president, Richard Yu, warned in August that the company was running out of smartphone chips.

Honor may be able to order suppliers before a new US administration is formed, said Peng of Canalis. She said Honor was less likely to raise security concerns because it would be smaller than Huawei and had no role in next-generation infrastructure.

“You are much less likely to become a target of the US government,” she said.


Soo from Hong Kong

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