Last month, reports started popping up about a potential sale of Honor, a more budget-oriented smartphone division of Huawei, to a third-party. Today, a follow-up report claims that a sale is in the works, with the buyer buying a Chinese consortium led by Digital China - a company currently responsible for the distribution of Honor devices in the country - as well as the local Shenzhen government.
The deal is said to be worth 100 billion yuan ($15.2 billion), four times more than the original report suggested, and it includes everything from the brand, research and development, and supply chain management. In addition to Digital China, the purchase would involve three investment firms, with each one owning between 10% to 15% of the spun-off company, called Honor Terminal.
Huawei has been put under severe restrictions by the United States government, making it nearly impossible for the company to conduct business with U.S. companies such as Google or Qualcomm. The sale is seemingly meant to separate the Honor division so that it won't be affected by those restrictions. However, while Honor may not be directly affected by the sanctions on Huawei, it's unclear if spin-off companies can get away that easily, as noted by Tom Kang, a research director at Counterpoint. The company would also lose Huawei's backing, which could be important for its operations in Western markets.
Honor devices accounted for 26% of Huawei's smartphone sales - which amounted to 51.7 million units - in the third quarter of the year, according to estimates by Canalys, a market research company. It makes sense that the company would try to save the Honor brand considering it's already somewhat popular. Additionally, if restrictions are lifted from Honor, it could eventually start shipping its phones with Google services again, making them more attractive in European markets where users are accustomed to them.