Business

Huawei Sells Its Honor Phone Business After US Cuts Off Chip Supply

huawei honor business

The Honor smartphone business of Huawei Technologies Co. has been acquired by a Chinese government-backed consortium, for an amount the company hasn’t revealed yet.

The move is hardly surprising considering that US President Donald Trump’s administration obstructed its access to American technology. The aforesaid consortium was formed with over thirty Honor’s partners, the Shenzhen Smart City Technology Development Group Co., agents, and dealers, from private firms such as Suning.com Co. to government-affiliated companies such as the branch of China Postal and Telecommunications.

Following this transaction, Huawei will not have any shares in Honor. This deal is expected to help boost a brand that garnered huge popularity among youngsters living on a tight budget in recent years and expanded to overseas markets like Europe.

Huawei Barometer

It remains to be seen if the Honor spin-off leads to restarting the American chip supply to its new owners. The company’s rival, Xiaomi Corp saw a 6 percent drop in its share in Hong Kong on Tuesday.

“This move has been made by Honor’s industry chain to ensure its own survival,” the company said in a statement. “Huawei’s consumer business has been under tremendous pressure as of late. This has been due to persistent unavailability of technical elements needed for our mobile phone business.”

The sale is a representation of the impact of Trump’s administration’s sanctions on the largest technology company in China. Huawei has reportedly stockpiled critical components to make sure its core telecom equipment business does not meet the same fate and continue supplying China’s 5G rollout through at least next year.

The White House cited national security concerns to initiate a drive against Huawei since 2018, which led to the house arrest of its chief financial officer in Canada and restrictions from using the company’s 5G equipment in countries like Japan and the U.k.

As if that weren’t enough, the White House passed extensive restrictions against suppliers this year, taking care of loopholes that enabled Huawei to acquire ready-made semiconductors to keep its consumer business running. Watch this space for the latest business news.

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