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:ย 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 worldโ€™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 toย shake offย its connections with the Chinese state.
  • A change of ownership may help Honor regain access to semiconductors it needs. However, the companyโ€™s premium Huawei smartphone brandโ€”more dependent on sourcing advanced chipsโ€”is still subject to US restrictions.ย 

Details:ย Newly founded Shenzhen Zhixin New Information Technology will acquire all of the business assets of the Honor brand, according to aย joint statementย 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 platformย 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 Suning.com, 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 โ€œtremendous pressureโ€ because of โ€œa persistent unavailability of technical elements needed for our mobile phone business.โ€ The US government previouslyย imposedย license requirements on global semiconductor foundries and vendors that ship to Huawei products which contain US technology.
  • โ€œThis sale will help Honor’s channel sellers and suppliers make it through this difficult time,โ€ Huawei said.
  • The statement did not disclose details of the deal.ย Reutersย previously reported that it might be an all-cash sale worth between RMB 15 billion (around $2.2 billion) and RMB 25 billion.

Context:ย 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.ย 

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

Writing about semiconductors and telecommunications.