After repeated reports, Huawei has finally made an official announcement declaring the sale of its subsidiary, Honor, in China for an undisclosed fee. Following the announcement, Huawei Investment Holdings Co will have no share or say in the management of the new independent brand. The move comes as US restrictions led by the Trump Administration have severely crippled Huawei’s ability to procure essential hardware such as chipsets even to the extent of affecting its ability to make HiSlicon Kirin chips. Additionally, Huawei’s 5G equipment infrastructure buisness also came under the scanner as the Trump Administration called it a serious threat to national security, an allegation repeatedly denied by Huawei.
Specifics of the Huawei-Honor split
Talking about specifics, Huawei’s agreement for purchase is with Shenzhen Zhixin New Information Technology Co. Ltd., a consortium of over 30 agents and dealers in China. There are no financial numbers but a previous report indicates the deal is around 15.2 billion USD. As per the official statement, the move was made in the best interest of Honor and will protect Honor from the current tight scrutiny that is over Huawei.
Honor’s top management as well as talent teams will retain their respective positions working as before with Geroge Zhao, president of Honor, now assuming the position of Chief Executive Officer (CEO).
According to some industry analysts, this split up could save Honor from the tight US restrictions that deny the OEM from Google Mobile Services (GMS) and chip supplies. However, whether/if that really happens is yet to be seen. As a subsidiary of Huawei, Honor has had the same troubles as Huawei in this regard.
Catalyst for Samsung and Xiaomi’s rise
While this move might save Honor from bankruptcy, it is unlikely to have any major impact on the global standings in the smartphone industry. In fact, Huawei’s market share will shrink further as earlier statistics included sales numbers of both Huawei and Honor combined. Hence, the immediate beneficiaries of this move will be Samsung and Xiaomi, as statistics have already started to show. Huawei had temporarily usurped the number one spot (reported by Canalys) from Samsung for a brief while in H1 of 2020. However, analysts said that the dominance came mostly from strong local demand rather than international shipments.
The Q3 2020 report from IDC, Counterpoint and Canalys indeed pointed out that Samsung had regained the top slot from Huawei as the Korean giant posted its highest quarterly revenues figures ever. Interestingly, as per the same report, Xiaomi overtook the number two spot for the first time in a long time held by Apple with a year-on-year growth of 46 percent. Xiaomi’s impressive shipments coupled with no US restrictions could very well be the catalyst to cement its place as the second largest smartphone maker in the near future as troubles show no signs of stopping for Huawei.