Honor is a subsidiary of Huawei that sells budget smartphones, watches and other smart devices in the Western part of the world. Due the ongoing restrictions placed on Huawei by the Trump Administration, Honor found itself caught up in the mess, however there seems to be light at the end of the tunnel.
Today, Huawei confirmed the selling of Honor to a consortium of companies. The confirmation was made by a joint statement made on a Shenzhen paper. According to the statement, Huawei will not hold any shares of Honor or be involved in any management decisions. Honor’s management team will however remain intact without interference from Huawei.
The new owners are a consortium that includes some government-backed companies, they include, Shenzhen Smart City Technology Development Group, a state-backed organization tasked with promoting cloud, 5G, smart city tech amongst other state enterprises; China Postal and Telecommunications Appliances, a state-owned distribution provider of telecoms products; and electronics retailers like Suning and Sundan.
“This acquisition represents a market-driven investment made to save Honor’s supply chain. It is the best solution to protect the interests of Honor’s consumers, channel sellers, suppliers, partners, and employees,” said the statement signed by the 40 companies.
Now that Huawei has broken links with this subsidiary, will the restrictions made on it by the US government affect Honor? Does this mean that US companies will be free to work with Honor, those companies include Google which provides Android OS and security updates plus Google Mobile Services that are crucial for apps like WhatsApp and Gmail to run on a smartphone. Could it also mean that hardware companies, like Taiwan’s TSMC which uses US technology to provide Huawei with components to build its CPUs and other chips, will be free to partner with Honor? Only time will tell.
Reuters reported that Huawei got $15 billion for Honor. This cash injection will help the company stay afloat as the restrictions continue to gradually erode business for them. Hopefully the money will help them ride out long enough to solve the standoff with the US government.
Its good to note that the consortium poses no threat to Huawei’s market position. Therefore, Huawei has the option to buy back Honor in future.