Huawei plans to divest budget phone unit Honor

Huawei plans to divest budget phone unit Honor”

The frontrunner in this deal is supposed to be the Digital China Group, since it is a major ally and a distributor of Huawei.

The information got here days after a Chinese language tech information blogger claimed Huawei is planning to promote Honor.

Huawei Technologies, the troubled smartphone and telecommunications equipment giant, is reportedly looking to sell parts of the "Honor" sub-brand.

Thus, representatives of the Chinese brand met with the Digital China Group, TCL, and Xiaomi Corp and discussed the prospect of selling parts of Honor. Allegedly, Huawei wants to generate around 25 billion yuan from the sale, which would correspond to about 3.16 billion euros.

Besieged by US tech sanctions, Huawei could also be trying to shake up its smartphone enterprise that has taken successful after dropping core semiconductor components and software program providers. Honor phones are also available in Southeast Asia and Europe.

The lower-end smartphone market is known for quite thin margins, with Honor a year ago not quite producing 5 billion yuan ($744 million) in net profit on revenues of between RMB70 billion ($10.4 billion) and RMB80 billion ($11.9 billion).

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The U.S. government previous year moved to prevent most U.S. companies from conducting business with Huawei, saying the tech giant was ultimately answerable to the Chinese government. Reuter's report has also said that this sale might even cover Honor's brand, including their research and development unit and supply chain management businesses.

Xiaomi and Oppo saw their Europe sales grow 55 per cent and 41 per cent respectively in the second quarter as they filled a void created by Huawei's 46 per cent decline in year-on-year sales, Counterpoint data showed.

Huawei can no longer find a sustainable way to maintain Honor's business prospects.

China's second largest smartphone maker is aiming for a market share of at least 5% in Europe by next year and plans to be one of the top players there over the next three years.

Shares in Digital China initially rose by their maximum daily limit of 10% but later pared gains to stand 3% higher on Wednesday afternoon, giving the Shenzhen-listed company a market value of around $2.9 billion.

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