China is always in the news over its trade and geopolitical tussle with other nations. During the Trump administration, the tussle between the two countries grew intense. Especially when Trump banned Huawei, a Chinese smartphone brand, from operating in the US. The same Huawei is now back in the spotlight, but for some other reason.
This time, the sources say they are looking for a buyer to sell their premium-smartphone brands like Mate and P. Could this be their decision to take an exit from the smartphone-making business slowly? There have been talks going on between Huawei and potential buyers for months, but the buyers’ names have been kept confidential.
Why is Huawei Selling P and Mate Brands?
Huawei has begun its search for potential buyers to sell its smartphone arm from last September, the valuation for the deal has not been disclosed yet. The possibility is that the deal might not go through as there are several issues with it. The first one is that they are still trying to manufacture the phones that run on their own Kirin chips.
However, the official spokesperson at Huawei has dismissed the ‘rumors’ of its smartphone brands. They said that Huawei has no such plans to sell its smartphone business. Even the Shanghai government has declined to comment on the matter, claiming they are “unaware of the situation.” It could be selling the smartphone business because they have not much hope from the Biden administration either. The possibility of Biden uplifting the ban on Huawei from operating in the United States is slim.
There are plans by the Shanghai government to form a consortium of investment firms backed by the government that will lead the deal to take over the brands. The management is going to be the same even if the deal goes through.
Dealing With US Sanctions
Huawei is one of the largest global telecom equipment makers and also the second-largest smartphone manufacturer. Last year, Huawei announced that it is selling its budget smartphone brand – Honor, to a group of dealers backed by the Shenzhen government.
The deal fetched Huawei more than CNY 100 billion in all-cash. The Honor brand is known for the budget smartphones it makes. The sanctions put on by the US government caused a massive disaster in the supply-chain for Huawei, as the components like chips were not available, and it couldn’t use Google Mobile Services.
Huawei may be planning the new deal with aiming something similar in mind. Washington has declared the telecom operator a national threat, and the company denied the accusations. Insufficient chip supply and inaccessible US market is a massive blow to the company.
There have been indications by Huawei on a new deal with chip-makers like Qualcomm and Intel for their new phone. Richard Yu, Chief Executive of Huawei Consumer Business Group, commented that the US restrictions would end up in a halt in the production of Kirin chips. The stockpile is likely to end this year.
The restrictions put forth by the Trump administration are causing massive trouble for Huawei as it relies on software that is provided by companies like Cadence Design Systems and Synopsys to make its chips. Once the design is finalized, it outsources the production to TSMC in Taiwan. The Taiwan-based manufacturers rely on materials from US companies. The Huawei brands like P and Mate are top-end premium smartphones rivaling the smartphones like Apple’s iPhone. Both brands mark up 40% sales from the last quarter of 2020.
What do you think about this deal? Do you think once the deal goes through, the smartphone maker will enter the US market? Let us know in the comments and follow us for more tech news.