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Although there is no official confirmation of the price tag, media outlet Reuters previously indicated Honor brand could bring Huawei up to $15 billion.
Huawei Investment Holdings Co Ltd will no longer have shares in the Honor Brand. This is because a group of companies on Tuesday issued a joint statement in the “Shenzhen Special Zone News” that Shenzhen Zhixin New Information Technology Co., Ltd will acquire the Honor brand for an undisclosed amount.
Notably, the Shenzhen Zhixin New Information Technology Co. Ltd is invested by more than 30 glory agents and distributors and also by Shenzhen Smart City Technology Development Group, which is a state-backed organization.
The acquisition comes after weeks of rumors and market pressure especially from sanctions imposed by the United States government on Chinese tech companies.
Although there is no official confirmation on the price tag, media outlet Reuters previously indicated Honor brand could bring Huawei up to $15 billion.
Huawei and Honor Brand: More Details
It has been noted that the Chinese government through Huawei has been in competition with the American backed tech companies to control the global 5G network.
Previously, Huawei has lost its bid to capture the European 5G market as more countries turn their back on the company. Earlier in October, Sweden joined other seven European countries from restricting the China-backed company from supplying its 5G telecommunication services.
This was a huge blow that cost the company billions of possible revenues amid the intense coronavirus crisis.
Notably, with the global smartphone shipments having dramatically declined during the pandemic, Huawei is seeking all avenues to save its budget and keep its shareholders profitable.
With Honor Brand now decoupled from Huawei relations, it can now have more flexibility while developing its own products in the market. The statement noted that the company’s management will remain unchanged even after the acquisition. In the future, the company anticipates looking for more investment partners and possibly listing to raise more capital.
Having sold the Honor brand to state-backed organizations and existing suppliers, Huawei stands to repurchase the business in the future.
“It will be easier for Huawei to make a potential buyback in the future from this consortium, which might not be so easy if they sell it to other smartphone or electronics makers,” said Will Wong, an analyst at IDC.
Locally, Huawei is also facing fierce competition from smartphone companies like Xiaomi, Oppo and Vivo. However, with enough capital at its disposal, Huawei stands at a vantage point to compete with most global smartphone companies.