The trigger has been pulled, and the deal is about to be done and dusted. Huawei is in the final stages of discussion for selling off its sub-brand Honor.
After months of rumours circulating about this day, it has finally arrived. According to media outlets in China, Huawei’s Honor brand has found a new home with Digital China which is a newly begun Chinese state-owned joint venture.
The deal size is currently being estimated to be 100 billion yuan ($15.2 billion). Reports from Chinese media have confirmed that the all-cash sale will be including all important assets such as the research and development capabilities, 7000-plus employees, the supply chain management and more.
This is not the first time Digital China is going to shake hands with Huawei. According to sources, they are already partnered in several other businesses such as cloud computing and more.
When the deal goes through, the state-owned joint venture will also be joined by three investment firms backed by the financial and technology hub Shenzhen government with each of them owning 10% to 15% of Honor brand.
The sources, declining to be identified, also mentioned that Honor aims to go public within three short years post the sale.
Quite obviously, as many already know, this move comes after the U.S government banning the conduct of business with Huawei. Thus, now that Honor will soon start operating under Digital China, it can significantly bolster its sale of budget range smartphone without being subjected to the ban.
As Honor coming out from Huawei’s umbrella, It could possibly get rid of the ban imposed by various companies, especially Google. After being an independent entity, Honor may get access to Android with all other required Google Mobile Services and source parts from other supplies which is a major plus for them. Huawei launched Honor in the year 2013, but it seldom acted like its subsidiary.
Honor has mostly operated its business independently since its inception. The brand, using third party retailers and its own official website, has been selling smartphones in China, India and Europen countries wherein it competes to grab market share in the budget segment against the usual suspects – Xiaomi, Oppo and Vivo.
However, smartphones are not only the only category Honor deals in, but their products also include computers, laptops, tablets, smart TVs and many other consumer electronic accessories.
Chinese sources have reported that Honor was able to book only 6 billion yuan in profits on revenue of close to 90 billion yuan last year as the margins for lower-end smartphones are meagre. However, that is something that Digital China will soon change as the acquisition goes through according to various analysts.
Honor is one among several brands which are aiming to help consumers turn their phones into central control centres for their internet-connected devices such as smart speakers, home appliances and so on. Thus, many seem to be betting that the new owners will focus on building up Honor’s IOT aka internet of things side of the business in order to snatch potential market share for future growth and subsequently rake in higher net profits.
Currently, everyone, including Huawei, Digital China and the Shenzhen government is yet to comment on the developments. However, some Chinese sources have hinted at the fact that the sale has already been done while others are reporting it’s in the final stages.
There’s a similar divide when it comes to the official announcement date as well. While some sources believe it could come this Sunday, others believe it could take up to November 20th. We will keep you updated on all future developments. Until then, stay tuned.
