Huawei sells its subsidiary Honor under pressure from the US

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The Chinese firm acknowledges being under “enormous pressure” due to restrictions on the purchase of semiconductors

The US pressure campaign against Chinese technology begins to undermine the defense of its victims. Huawei, one of the hardest hit companies, today announced the sale of its subsidiary Honor, a maker of mobile phones and other affordable devices. This split has been portrayed by the official Chinese tabloid Global Times like “cutting off the arm to save the body.”

Huawei has confirmed this morning through a release in which she acknowledged being under “enormous pressure.” The reason is the sanctions imposed by the Trump administration. The latest round, which dates from last August, increased restrictions on the acquisition of semiconductors developed with US technology, even for third-country suppliers. This has translated into a “persistent lack of technical elements necessary for our mobile phone business,” the Chinese company explained on Tuesday.

“This sale will help Honor vendors and vendors get through these difficult times,” the text continued. “Once the operation is completed, Huawei will not maintain any action or be involved in any type of business management or decision in the new company.” His hope happens because, after cutting ties, Honor is safe from the punitive measures of the United States.

This is at least expected by its buyer, a newly minted consortium formed by 30 companies linked to Honor’s production chain, dubbed Shenzhen Zhixin New Information Technology, who would have proposed this solution in the first place. The statement has not disclosed the price of the transaction: estimates range from the 15,000 million dollars (12,600 million euros) mentioned by the Reuters agency to the 40,000 million (33,700 million) of the Chinese news portal Huxiu.

The consortium has made itself heard through a joint note published on the pages of Shenzhen Special Economic Zone Daily, ensuring that “the change in ownership will not affect Honor’s development direction or the stability of the executive team.” Zhao Ming, until now the head of the terminal line, will become the CEO of the new independent firm. This same text has defended the maneuver as an effort to save the firm, “the best solution to protect the interests of consumers, vendors, suppliers, partners and employees of Honor” and “more importantly, a general victory for the industry” .

“Since its inception in 2013, the Honor brand has focused on the youth market by offering mid- and low-priced phones,” explained the Chinese company. “In these last seven years, Honor has become a brand of smartphones that sells more than 70 million units annually ”. Only in the third quarter of 2020, Huawei sold 51 million terminals, 26% of which – according to data from the consulting firm Canalys – carried the logo of its ex-subsidiary.

Honor maintains a 15% market share in China, just below Huawei. Last year it posted revenue of 90 billion yuan (11.5 billion euros) and a net profit of 6 billion (770 million). This represents 9% of the total income of Huawei, which the fight for survival has turned, from today, into another rival.

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