Huawei is selling its budget smartphone unit Honor, the company said Tuesday, to a consortium that is majority-owned by the local Shenzhen government in a deal to keep the brand alive.

Why it matters: The sale is a direct consequence of US technology export restrictions imposed on the Shenzhen-based company over the past year and a half. The world’s second-largest smartphone maker has lost access to most high-end semiconductors as well as Google apps and services on the Android operating system crucial to its handset offerings.

  • The Honor brand buyer is majority held by the Shenzhen government. Huawei has been trying to shake off its connections with the Chinese state.
  • A change of ownership may help Honor regain access to semiconductors it needs. However, the company’s premium Huawei smartphone brand—more dependent on sourcing advanced chips—is still subject to US restrictions. 

Details: Newly founded Shenzhen Zhixin New Information Technology will acquire all of the business assets of the Honor brand, according to a joint statement published in a local newspaper on Tuesday.

  • Shenzhen Zhixin New Information Technology is 98.6% owned by a company that is wholly owned by the State-owned Assets Supervision and Administration Commission (SASAC) of the municipal government in the southern Chinese city of Shenzhen, according to Chinese corporate information platform Tianyancha.
  • A limited partner holds the remaining 1.4% of the company, which is 62.34% held by an investment firm owned by the Shenzhen SASAC and the Finance Commission of Shenzhen Municipality.
  • Huawei said in its statement that more than 30 Honor agents and dealers, including retail giant, co-founded Shenzhen Zhixin New Information Technology along with the majority owner. However, there was no public record of such entities holding stakes in the new Honor owner.
  • A Huawei spokesperson declined to comment when contacted by TechNode on Tuesday.
  • Huawei said in a statement Tuesday that its consumer business had been under “tremendous pressure” because of “a persistent unavailability of technical elements needed for our mobile phone business.” The US government previously imposed license requirements on global semiconductor foundries and vendors that ship to Huawei products which contain US technology.
  • “This sale will help Honor’s channel sellers and suppliers make it through this difficult time,” Huawei said.
  • The statement did not disclose details of the deal. Reuters previously reported that it might be an all-cash sale worth between RMB 15 billion (around $2.2 billion) and RMB 25 billion.

Context: Honor is a budget smartphone brand that Huawei established in 2013. It completes with other budget brands such as Xiaomi and Oppo while the Huawei brand sells to the high-end handset market. 

  • The Honor brand now sells more than 70 million units annually, Huawei said.

Wei Sheng

Writing about semiconductors and telecommunications.