Huawei sells Honor due to 'technical equipment shortage'

Huawei has announced the sale of its Honor smartphone business, crediting the decision to a shortage of technical equipment caused by the trade restrictions imposed by the US government.

The Chinese tech giant confirmed that Honor will be sold to Shenzhen Zhixin New Information Technology - an enterprise owned by the government of Shenzhen, where Huawei is headquartered.

In an official statement, Huawei announced that its “consumer business has been under tremendous pressure as of late”.

“This has been due to persistent unavailability of technical elements needed for our mobile phone business. Huawei Investment & Holding Co., Ltd. has thus decided to sell all of its Honor business assets to Shenzhen Zhixin New Information Technology Co., Ltd. This sale will help Honor's channel sellers and suppliers make it through this difficult time.”

The tech giant added that the decision was “made by Honor's industry chain to ensure its own survival” and that, “once the sale is complete, Huawei will not hold any shares or be involved in any business management or decision-making activities in the new Honor company”.

However, it didn’t confirm whether Honor’s main distributor and Huawei’s cloud computing partner, Digital China Group, will hold an important role in the new ownership.

Honor, which was first launched in 2013, focuses on low- to mid-tier priced smartphones marketed to younger consumers.

According to CCS Insight chief of research Ben Wood, Huawei’s official announcement about the sale of the business unit, which has been speculated since last month, is “an important step”.

“However, at this stage, there is a distinct lack of detail on the next steps making it hard to understand what direction the new business will take and how it will recover?” he added. 

“We assume that the goal will be for the new independent company to re-establish ties with Google and component suppliers. It seems Huawei had few other options other than closing or divesting the Honor division given the punitive sanctions imposed by the US administration,” said Wood.

“At its peak, Honor was shipping 70 million phones annually. Given its historic dependence on Huawei for product development and scale it will be interesting to see whether an independent entity will be able to recover.”