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Huawei Planning To Sell Parts Of Its Honor Smartphone Business: Reports

Huawei Planning To Sell Parts Of Its Honor Smartphone Business: Reports
The Chinese tech giant Huawei Technologies Co Ltd is planning to sell parts of its Honor smartphone unit and is in negotiations for the same with Digital China Group Co Ltd and other companies, claimed reports citing sources. It is expected that Huawei is planning to generate up to 25 billion yuan ($3.7 billion) from the sale.
The reports claimed that in light of the tough sanctions imposed on the company by the United States, Huawei no wants to rest its business strategies and plans to focus more on its higher-end Huawei phones instead of the low budget phones of the Honor brand that is targeted as young people and the budget conscious consumers.
According to the reports, while the company has not yet finalised the assets that it wants to sell, sources reportedly said that the sale could include the Honor's brand, research & development capabilities and the supply chain management business associated with the assets.
Sources reported said that that company plans to complete the deal in cash and could ultimately be smaller - somewhere in the range of between 15 billion yuan and 25 billion yuan.
The forerunner in the race, according to sources, is Digital China which is also the main distributor for Honor phones. However, Chinese electronics maker TCL and rival smartphone maker Xiaomi Corp are among the other suitors for the deal.
None of the sources were named in the reports. There were also no reports from Huawei, TCL, Digital China and Xiaomi.
Huawei launched and established its Honor brand as a company in 2013 but currently the business mostly operates independent for its parent company. Within the highly competitive budget phone market of China, the Honor brand currently competes with the likes of Xiaomi, Oppo and Vivo. The smartphones of the company are also available in Southeast Asia and Europe.
For the Hobnor brand, selling it off be Huawei could be significantly beneficial for it as well as for its suppliers and China's electronics industry, said Kuo Ming-chi, an analyst at TF International Securities.
"If Honor is independent from Huawei, its purchase of components will no longer be subject to the U.S. ban on Huawei. This will help Honor's smartphone business and the suppliers," he wrote in a research note last week.
According to industry reports, last year, less than 5 billion yuan in net profit on revenue of about 70-80 billion yuan was booked by Honor as the phones in the budget segment operates on very thin profit margins.
Reports also claimed that bank loans will primarily be used by Digital China to finance the deal if it manages secure it. Digital China is also the partner of Huawei in cloud computing and other businesses. The company is planning to secure financing in the forthcoming weeks. 

Christopher J. Mitchell

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