Huawei loses its Honor after state bailout

Embattled Chinese telecoms vendor Huawei has sold its standalone Honor smartphone sub-brand to a consortium founded by a state-owned enterprise.

This move has been rumoured for some time and is being framed as the only way to protect the interests of the stakeholders in the Honor supply chain. It certainly seems to involve most of the Chinese ones, with the statement below (which has been widely republished) detailing everyone involved. Shenzhen Zhixin New Information Technology seems to be the name given to this consortium.

Market-driven investment eh? As the state-controlled Global Times confirms, the new company was jointly founded by state-owned Shenzhen Smart City Technology Development Group, of which all those companies with ‘Shenzhen’ at the start of their name are presumably part. This statement is either deliberately deceptive or Huawei thinks the free market and state-owned companies are one and the same, which is telling by itself.

In the English-language statement on its own website Huawei says “Once the sale is complete, Huawei will not hold any shares or be involved in any business management or decision-making activities in the new Honor company.” Meanwhile the same GT the Huawei employee who headed up the Honor business is the head of the ‘new’ company. Even GT couldn’t resist the scare quotes.

We have considerable sympathy for Huawei in its battle to save its smartphone business from the consequences of US sanctions. The rationale behind the chip ban is weak and seems to have been imposed in order to give the US another bargaining chip in its battle of wills with China.

But don’t give us all this spin about market-driven investments and independent companies. The billions of dollars Huawei will receive for this move seem to largely come from the Chinese state and it’s hard to believe the US will be happy to view Honor as wholly independent. In fact, the direct involvement of the Chinese state in the ‘new’ company will probably make it even more reluctant to let Honor get hold of US technology.

Huawei says Honor ships over 70 million units annually, which is around 35% of the company’s total and would put it in the top ten global smartphone brands by itself. It’s in danger of going bust through no fault of its own and Huawei is right to do everything it can to save it. But if Huawei thinks this move will be viewed as anything other than state assistance, which it has always insisted it doesn’t get, then it’s at best naïve.