Huawei seems to be in dire straits, enough to need to sell off parts of its business to refocus its resources. While it isn’t bowing out of the smartphone business completely, sources claim that it is looking into selling a large part of its Honor smartphone business. While this might not be a shocking move, it could still end up as bad news for both Honor as well as Huawei, especially in the midst of the uncertainty of the company’s future.
According to Reuter’s sources, Huawei is in Talks with Digital China Group Co Ltd, Honor’s main distribution partner, in the hopes of selling its subsidiary. Other potential buyers reportedly include TCL and even Xiaomi, both Chinese companies and rivals when it comes to the smartphone market. None of the companies commented on the deal.
Huawei isn’t selling Honor entirely but it might as well be doing so. The assets that will be sold off include the brand, R&D capabilities, and supply chain management. What will be left of Honor at that point will probably not be enough to sustain it as the independent subsidiary that it is today.
While famed analyst Ming-chi Kou painted such an acquisition as a win-win for Honor, some factors might mitigate whatever advantages the deal might have. While distancing itself with the beleaguered Huawei could do well for its image, Honor would also lose access to some traits, both branding and software, that also set it apart from the competition.
Huawei has reportedly reached this decision in order to focus on its high-end smartphones instead of budget phones where profit margins are low. That said, Honor’s phones, which offer nearly the same features and specs as Huawei flagships but at more affordable price points, are partly responsible for Huawei’s rise in the smartphone market, making up nearly half of Huawei’s overall sales. The deal is expected to land Huawei up to 25 billion RMB ($3.7 billion) in cash.