In the background of the election cycle, the U.S. trade war with China continues to rage with Huawei taking some of the most damaging mortars so far. It's unable to import anything even remotely American in nature and has had to make painful adjustments to its operations. One change rumored to fall out of this pivot was a potential sale of its subsidiary Honor. Now, we're learning more details about the multi-billion dollar deal that could land as early as this week.
Reuters reports from sources that the 100 billion yuan or US$15 billion all-cash collaborative bid comes from three or more investment firms funded in part by the municipal government of Shenzhen — Huawei's home base — and Digital China, Honor's main distributor. Included in the sale are more than 7,000 staff and facilities for research, development, and supply chain. An agreement could be announced as soon as Sunday.
While it has produced and sold phones for international sale under its own name, Huawei's main reach to Western markets has been through Honor with premium-tier hardware offered at competitive prices. However, as the Trump administration began sanctioning the company from U.S. imports in August, sales have tumbled on all fronts. Even as an upcoming Biden presidency is perceived to bring a friendlier trade agenda with China, defense and intelligence agencies may insist that the Huawei blockade remain to protect the U.S. from a national security threat.
Earlier reporting in October floated initial valuations between $2 and $4 billion — meaning that it seems that there is great urgency in pushing the lever.
For Huawei, spinning off Honor to a suitor would open up some breathing room for it to focus on its corporate and high-end consumer businesses. For Honor, it's hoped that an ownership change will let it fall under the D.C. radar and permit the Chinese brand to sell new phones with up-to-date versions of the popular Android OS instead of relying on a hastily-made substitute to the global markets in which it has sustained a presence.