Caixin
Jan 07, 2021 06:03 AM
BUSINESS & TECH

Huawei Spinoff Honor Works With Qualcomm on 5G Devices

An Honor retail store in Hefei, East China’s Anhui province, on Tuesday. Photo: Yingfute Experience Store in Hefei
An Honor retail store in Hefei, East China’s Anhui province, on Tuesday. Photo: Yingfute Experience Store in Hefei

Honor, the budget cellphone brand spun off from Huawei Technologies Co., is moving to resume a partnership with Qualcomm to deliver new handsets based on the U.S. semiconductor giant’s 5G chipsets in coming months, people familiar with the matter told Caixin.

Honor is working with Qualcomm to develop 5G smartphones that are expected to hit the market in May or June, sources said, adding that the partnership will first focus on mid-range products.

Honor and Qualcomm didn’t comment on Caixin’s inquiries about the matter.

Huawei in November signed an agreement to sell all of Honor’s business assets for an undisclosed amount to Shenzhen Zhixin New Information Technology Co. Ltd., a company backed by a consortium of more than 30 agents and retailers, including companies affiliated with Huawei’s hometown government of Shenzhen. The sale came as the telecom giant struggles to survive U.S. sanctions that cut off its supplies of advanced chips.

Citing national security concerns, the Trump administration ratcheted up restrictions against Huawei, the world’s second-largest smartphone vendor behind Samsung Electronics Co. Ltd., over the summer, requiring chipmakers to obtain a U.S. government license before selling products made using American technology to the Chinese company.

The separation from Huawei could allow Honor to avoid U.S. sanctions and restore its supply chain, analysts said. Ren Zhengfei, Huawei founder and CEO, said at an event last month that Honor should cooperate with partners in the U.S. and aim to challenge its former parent company.

Honor rushed to rebuild its business ties with U.S. companies after the spinoff. In late December, Honor agreed to install Microsoft Corp.’s Windows 10 operating system in its laptops in its first foreign partnership as an independent company.

Qualcomm President Christiano Amon said in December his company initiated talks with Honor on licensing technology. Amon said the California-based company was “very excited” about the spinoff.

“We’re very eager for the opportunity to partner and work with Honor,” he said.

Meng Pu, head of Qualcomm’s China operations, said that after the spinoff Honor is a new company with many old acquaintances, making communication easy.

“Qualcomm is very much looking forward to supplying products to Honor,” Meng said.

Qualcomm applied to the U.S. government for authorization to export and sell products from all of its lines to Huawei. The company previously said it obtained authorization for 4G products. Amon said in November that the company had not been authorized for 5G products.

Honor’s business operations haven’t been affected by the U.S. sanctions and the selloff, a supplier of the company said. The company informed its suppliers to continue working on 5G devices, this person said.

Caixin learned that Honor is preparing for the launch of its first new product after the divestiture — the V40 smartphone. The launch, originally scheduled for Jan. 12, was postponed because of a recent Covid-19 flare-up in China.

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Theoretically, the new Honor should not be subject to U.S. restrictions after the spinoff from Huawei, but if American authorities still target the company, it may face difficulties surviving due to inadequate supply chain, said Jia Mo, telecom analyst at market research firm Canalys.

Another analyst said it would take until the second half this year for Honor to restore its supply chain while enhancing its brand-building as an independent company. Honor invested heavily in expanding its offline sales networks, a retailer close to Honor said.

Huawei launched Honor in 2013 as a brand targeting the low-end and mid-range smartphone markets, while its main Huawei series remained focused on flagship phones meant to compete with high-end rivals like Apple Inc. and Samsung.

In 2019, Honor-branded smartphone sales accounted for 26.4% of Huawei’s total phone shipments. But it faced stiff competition from domestic rivals, including Vivo and Oppo, which have seized some of its market share since the second quarter of last year, according to data from research institute IDC.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimson@caixin.com).

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