Huawei to Sell Out Its Honor Phone Business Amid US Sanctions

Huawei announced Tuesday it is selling its budget brand Honor to ensure its survival. Huawei will no longer have ownership of the brand or be involved in any decision-making after the sale is completed.

Buyers include more than 30 Honor dealers and suppliers. The sale of Honor was initiated as a means to sustain the brand and its partners under the pressure of US sanctions.

The United States adopted strict measures against the Chinese tech giant, demanding manufacturers who use US technology in their products to cut ties with Huawei and stop supplying semiconductors to the company. At present, businesses must apply for a license to remain partners with Huawei.

The ban took effect on Sept. 15 and though mass orders of chips were stockpiled before the ban, Huawei still grappled with a shortage. In the third quarter this year, the company dropped to second place in the global smartphone market with 51.9 million smartphones shipped and a 14.7% market share, down 22% year-on-year. The slump was severe both on the international market and within China, with a notable drop of more than 15% domestically.

The parent company’s grim predicament is shared by Honor, which relies heavily on Huawei’s technologies and suppliers.

SEE ALSO: Huawei to Sell Its Budget Honor Brand for $15B to Digital China and Others

Huawei stated it has decided to sell the Honor brand as the company is no longer able to obtain key technologies while facing tremendous pressure on its consumer business.

“We hope this new Honor company will embark on a new road of honor with its shareholders, partners and employees,” the statement said. “We look forward to seeing Honor continue to create value for consumers and build a new intelligent world for young people.”

It is unclear how the new ownership will circumvent US sanctions and acquire chips from global suppliers.

Honor was founded in 2013 and its cost-effective smartphone lines focus on mid-range phones targeting young people. The business accounted for 26% of Huawei’s 55.8 million total smartphone shipments in the second quarter this year. With more than 70 million annual smartphone shipments, Honor is both a popular brand within China and on the global market, where it competes with Xiaomi, Oppo and Vivo.

Rumors previously had it that Huawei might be on the verge of selling Honor to Chinese IT provider Digital China, three state-owned companies and electronics business TCL in a 100 billion yuan ($15.2 billion) joint deal.