Zhuhai government invests in embattled smartphone maker Meizu

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Entry-level model M1, released in December 2014 . (Image credit: Meizu)

Troubled Chinese smartphone maker Meizu has recently closed a round of funding from Zhuhai government-backed capital fund Honghua, the latest development for the Xiaomi rival following layoffs, declining sales, and shuttered storefronts.

Rumors about the Zhuhai municipal government takeover began circulating online earlier this week. According to business research platform Qixinbao, Meizu shareholder transfers were completed Thursday. Honghua, the state-owned fund under the Zhuhai High Tech Development Zone, replaced Meizu founder Huang Xiuzhang, also known as Huang Zhang, as the largest shareholder with 50.92% of the total, reported Jiemian.

Meizu later confirmed it received investment of an undisclosed amount from the Zhuhai government-backed capital fund, which now has one director on its board. However, it denied any change to controlling shareholders and maintained that Huang remains in control of the company, reported Tencent Tech.

Meizu was not immediately available for comment.

Company information on Qixinbao is now unavailable, according to a TechNode reporter’s observations on Sunday. The latest figures from Qichacha shows that Honghua ranks seventh with 2.09% in the shareholder list. Huang (49.08%) and Alibaba’s investment subsidiary Hangzhou Meitou (27.23%) remain the two largest shareholders.

Founded by Huang in 2003, Meizu was one of the country’s major music player manufacturers at the time. The Zhuhai-based company ventured into Chinese smartphone market in late 2006, achieving huge success three years later with its first smartphone model, the M8. It earned sales revenue of RMB 500 million ($75 million) over a period of five months in 2009, before Xiaomi was established in 2010 and the launch of Vivo’s first smartphone, the V1, in 2011.

However, Meizu’s first-mover advantages have fallen by the wayside. It reported smartphone shipments of 20 million units in 2017, compared with Xiaomi’s 55 million, Vivo’s 68 million, and Huawei’s 90 million in the same period, reported Chinese media citing IDC. Yan Zhanmeng, research director at Hong Kong-based Counterpoint Technology, said the figure sank to only 8 million units in 2018 “mainly due to the lack of funds” (our translation).

The Chinese smartphone maker has suffered a series of blows over the past year, with executives including co-founder Aber Bai and marketing head Yang Tuo—a former Huawei vice president—stepping down from the company. It has also more than halved the number of stores to fewer than 1,000 from 2,500 in 2016, according to Chinese media. It received $590 million from Alibaba in February 2015, when the Chinese tech giant sought to expand shares for its mobile operating system YunOS. The deal has reportedly lost its relevance since Alibaba renamed YunOS into AliOS and pivoted it into a vehicle system in 2017.