Hong Kong (Reuters)-Huawei Technologies Co Ltd has negotiated with Digital China Group Co Ltd and other suitors, saying that some of the Honor smartphone units will be up to 25 billion yuan ($ 3.7 billion).
Embattled Huawei will reset its priorities with US sanctions, focusing on high-end Huawei phones rather than youth and budget-focused Honor brands, they said.
The assets to be sold have not yet been determined, but could include Honor’s brand, R & D capabilities, and related supply chain management businesses, the two said.
According to one, the deal is a full cash sale and could eventually be a small one worth 15 to 25 billion yuan.
Digital China, the main distributor of honorary phones, has emerged as a front runner, but other future buyers include Chinese electronics maker TCL and rival smartphone maker Xiaomi Corp. People said.
Huawei, the world’s largest telecommunications equipment vendor and second-largest smartphone maker, declined to comment, as did TCL. Digital China and Xiaomi did not respond to requests for comment.
The Honor brand was founded by Huawei in 2013, but its business is primarily independent of its parent company.
“Situations that are mutually beneficial”
Kuo Ming-chi, an analyst at TF International Securities, said Huawei’s sale of its Honor smartphone business would benefit both the Honor brand, its suppliers, and the Chinese electronics industry.
“If Honor is independent of Huawei, component purchases will no longer be subject to a US ban on Huawei, which will help Honor’s smartphone business and suppliers,” he wrote in a research note last week. I am.
Last year, the U.S. government moved to prevent most U.S. companies from doing business with Huawei, saying the tech giant was ultimately responsible for the Chinese government. Huawei has repeatedly denied that it is a national security risk.
In May, Washington announced new rules aimed at limiting Huawei’s ability to procure critical chips designed for 5G network devices and smartphones.
The Honor brand sells mobile phones online through its site and third-party retailers, competing with Xiaomi, Oppo and Vivo in the Chinese low-end mobile phone market. The phone is also sold in Southeast Asia and Europe.
Research firm Canalys estimates that Honor-branded smartphones account for 14.6 million units, or 26% of Huawei’s 55.8 million smartphones shipped in the second quarter of this year.
However, the margins for low-end mobile phones can be very thin, with honors last year recording a net profit of less than 5 billion yuan with revenues of about 70-80 billion yuan, said one person.
If the bid is successful, Digital China, which has partnered with Huawei in cloud computing and other businesses, will fund the majority of bank loan transactions and will secure funding in the coming weeks. ..
Digital China’s stock initially rose 10%, the daily limit, but then rose 3% Wednesday afternoon, bringing the market value of Shenzhen-listed companies to about $ 2.9 billion.
($ 1 = 6.7389 Chinese RMB)
Report by Julie Zhu from Hong Kong. Additional report by David Kirton of Shenzhen. Edited by Sumeet Chatterjee and Edwina Gibbs
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