Huawei parts company with Honor

By LU Keyan

The dust has settled on the sale of Huawei’s budget smartphone business Honor, and, according to a statement Tuesday, a consortium of over 30 Honor agents and dealers now owns all its assets. Huawei will no longer hold any share nor participate in any decision-making or management of the new company. The price of the acquisition was not disclosed.

But Honor may need some more time to truly bid farewell with its parent company. Handover formalities and compensation for employees are still being discussed. Employees told Jiemian News that a new office space is being prepared.

Gone but not forgotten

Rumors of a sale had been circulating for a while with TCL and Digital China among the alleged bidders. Zhixin New Information Technology, the consortium, was established in September by Shenzhen Smart City Technology Development Group, an enterprise wholly owned by Shenzhen’s State-owned Assets Supervision and Administration Commission (SASAC).

Although Huawei has no part of the new Honor, that doesn’t mean the telecom giant has completely abandoned its child. WAN Biao, COO of Huawei’s consumer business division, will be president of the new Honor with a number of senior executives also moving across.

Facing harsh sanctions from the US, Honor desperately needs funding, plus a strong grip on the supply chain and sales, as well as the firm support of local authorities.

“This acquisition is market-driven to save Honor’s industrial chain. It is the best solution for Honor’s consumers, sellers, suppliers, partners, and employees,” said Zhixin New in the statement.

Zhixin New also said the change of ownership will not change the direction or the stability of the Honor team. ZHAO Ming, CEO of Honor will remain in his post. After 22 years at Huawei, Zhao took over Honor in March 2015 and it has been the fastest-growing cellphone brand since.

March of Honor

In 2011, Xiaomi released a budget smartphone, the M1. All 100,000 were sold out within three hours, which shocked the whole cellphone industry. Huawei decided to take on Xiaomi and, as a result, Honor was born in 2013. From marketing strategy to the supply channels, Honor followed Xiaomi's path.

Within its first ten months, Honor sold more than 10 million phones across five different models. In 2014, sales doubled to US$3 billion (19.6 billion yuan). In 2015, it took Honor only six months to surpass the previous year’s sales.

But it didn’t stop there, unlike Xiaomi, Honor started to probe into the high-end market, and Honor stores sprung up in every Chinese city. Huawei supported its child unconditionally, offering employees of Honor tempting rewards.

The year 2017 was a milestone for Honor, with sales hitting 71.6 billion yuan, 10 billion yuan more than Xiaomi. But the triumphant march of Honor ground to a halt when the trade war broke out between China and the US.

Honor was desperate when it lost the Kirin chip option, but Qualcomm has promised to provide chips. However, due to the chip crisis, Honor has missed out on the Singles Day shopping event this year, handing the budget-phone crown back to Xiaomi.

Many dealers and agents not involved in the change of ownership do not have much faith in Honor. A seller in a smaller city told Jiemian News that Honor’s reputation rested exclusively on Huawei and Kirin.

Honor shared Huawei’s resources and supply chains, and the Kirin chip was once at the core of both Huawei and Honor’s visions of the future. Huawei spoiled Honor to the extent that it first mounted the Kirin 820 flagship chip on Honor, instead of its own Mate series.

“If Honor uses Qualcomm Snapdragon instead of Kirin, it may lose out to Xiaomi,” said the Honor seller. “And Xiaomi is good at forcing down prices.”

New opportunities

Optimists at Huawei said since Kirin is no longer available, it is a good chance for Honor to develop its own market. A Huawei employee said the company will transform from parent to hardware supplier.

In 2017, Honor tried to distance itself from Huawei with its Magic UI to distinguish itself from the Huawei UI.

For Huawei, the sale could be a precious breathing space bringing hundreds of billions of yuan into its account, giving it chance to focus on other sectors of its business, such as smart cars.