Despite U.S. sanctions imposed on Chinese companies are expected to at least ease a little following Joe Biden's victory as President-elect, it's too late for Huawei.
The Chinese multinational technology company that is headquartered in Shenzhen, Guangdong, has fallen as a victim of the sanctions, forcing it to sell its Honor sub-brand.
On November 17, 2020, Huawei agreed to sell the Honor brand to Shenzhen Zhixin New Information Technology.
In the news announcement on its website:
It was only back in July that Huawei surpassed Samsung and Apple to become the leading smartphone mobile brand in the world for the first time primarily due to a decrease in Samsung's global sales in the second quarter of 2020 due to the impact of the 'COVID-19' coronavirus pandemic.
That that achievement didn't help Huawei by much, especially during this global crisis that slows its businesses.
And with the fact that many other countries have avoided handing 5G network contracts to Huawei due to the U.S. sanctions, the Chinese company is financially hit.
This is why Huawei considered selling the Honor sub-brand to "ensure its survival".
Once the sale is completed, "Huawei will not hold any shares or be involved in any business management or decision-making activities in the new Honor company", Huawei said, adding that "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 also said that Zhixin New Information Technology will “acquire all business assets related to the Honor Brand”
Since its creation in 2013, the Honor brand has focused on selling low- to mid-end priced phones in China and globally. Targeting the youth market, Honor smartphones are visually distinctive with their hue-shifting glass backs, offering users unique gradients that appeal younger generations.
Since then, Honor has developed into a smartphone brand that ships over 70 million units annually.
About 14.6 million Honor smartphones were shipped in the second quarter, or about 26% of the 55.8 million smartphones Huawei shipped, according to statistics from research firm Canalys.
With that impressive number, Honor also managed to save a lot of money by operating mostly through the internet.
The problem here is at Huawei.
After experiencing a progressively deteriorating relationship with the U.S. which took a turn for the worse earlier this 2020, when the U.S. Department of Justice brought 16 charges against the China-based company, including its “alleged long-running practice of using fraud and deception to misappropriate sophisticated technology from U.S. counterparts.”
The U.S. further imposed sanctions on Huawei which barred it from using fundamental Android experiences like Gmail, YouTube, Drive, and even the Play Store.
It also pressured Taiwanese chip manufacturer TSMC into ending its relationship with Huawei.
Read: After U.S. Sanctions, Huawei Starts Selling Smartphones With No Google
To ensure its survival, Huawei needed to make the bold move of selling Honor.
As for the buyer, Zhixin New Information Technology Co. Ltd., the company was born out of Shenzhen Smart City Development Group Co. Ltd..
It's reported that Shenzhen Smart City Development Group is a subsidiary of Shenzhen SASAC, which holds 98.6% of the shares while the Shenzhen state-owned Assets Cooperative Development Private Equity Partnership holds 1.4% of the shares.
“We hope this new Honor company will embark on a new road of honor with its shareholders, partners, and employees,” Huawei said in the buyout announcement.
“We look forward to seeing Honor continue to create value for consumers and build a new intelligent world for young people.”
The value of the deal hasn’t been disclosed.
But according to Reuters, the price Shenzhen Zhixin is acquiring the Honor brand by paying Huawei more than $15 billion.