A point of Honor: Huawei in talks to sell its youth-focused smartphone business – report

Digital China Group, TCL and Xiaomi said to be among suitors in deal potentially worth £2.8bn

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Embattled Chinese comms giant Huawei is said to be in discussions to sell its semi-autonomous Honor sub-brand in a deal that could raise up to £2.8bn and help refocus the firm's mobile lineup on high-margin flagships.

Huawei has reportedly pitched the business to Digital China Group, a Shenzhen-listed integrated IT services company that already handles distribution for Honor and is familiar with the business. Other suitors, according to Reuters, include TCL (which manufactures devices under licence for Palm and Alcatel, in addition to offering its own-brand smartphones and tablets) and Xiaomi.

Huawei has yet to disclose what components would be offered as part of the sale, although it would potentially include Honor's brand (which is strong across Asia, as well as in Eastern Europe), the unit's R&D apparatus, and the related supply chain business.

Huawei created the Honor brand in 2013 ostensibly to target younger and more budget-minded consumers. While Huawei's wares tend to encompass high-value devices like the P30 Pro, Honor aggressively targets the space occupied by the likes of Nokia and Xiaomi. It is, simply put, a volume business that can only really succeed at scale. But it's not one without its own degree of differentiation.

In recent years, Honor has operated with a large degree of autonomy from its parent, ditching EMUI for its own fork, called MagicOS. In happier times, the firm accomplished several mobile industry milestones, with the Honor View20 the first commercially available smartphone to use a hole-punch selfie camera. This device was also among the first to adopt a 48MP camera sensor.

Nonetheless, that business model was challenged in mid-2019, after the Trump administration placed Huawei on an entity list preventing US-based firms from trading intellectual property and technology with the company. Among other things, these sanctions have rendered Huawei and its associated companies unable to license the proprietary Google Mobile Services (GMS), which include Android must-haves like the Play Store.

This has, in turn, made Honor's smartphones less appealing to customers outside of Mainland China, and forced it to explore other avenues, including TVs, laptops, and IoT devices.

Any potential sale could remedy the ongoing challenges facing Honor's business. It follows that if Honor ceases to be part of Huawei, the crushing restrictions placed upon it would no longer apply, and it would be able to resume normal operations.

For its trouble, Huawei would benefit from a more focused mobile unit, as well as a fresh influx of cash while it tries to realign its business with present realities.

The Register asked Huawei for comment but has not heard back. We also contacted Honor, which declined to comment. ®


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