(Reuters) – China’s Huawei Technologies Co. Ltd. is in initial talks to sell its premium smartphone brands P and Mate, said two people with direct knowledge of the issue, a move that could end the company coming out of the high-end smartphone -manufacturing business.
Talks between the world’s largest telecommunications equipment maker and a consortium led by Shanghai-backed investment firms have been going on for months, people said, which has ceased to be identified as the discussions were confidential.
Huawei began exploring internally the possibility of selling the brands as early as last September, according to one of the sources. Both sources were not aware of Huawei’s valuation of the brands.
According to consulting firm IDC, Mate and P phone shipments were worth $ 39.7 billion between the third quarter of 2019 and the third quarter of 2020.
However, Huawei has not yet made a final decision on the sale and the talks may not end successfully, according to the two sources, as the company is still trying to manufacture its high-end home-designed Kirin chips at home. that power your smartphones.
“Huawei has learned that there are unfounded rumors circulating about the possible sale of our flagship smartphone brands,” a Huawei spokesman said. “There is no merit in these rumors. Huawei doesn’t have that plan. “
The Shanghai government said it was unaware of the situation and declined to comment further.
The potential sale of Huawei’s premium smartphone lines suggests that the company has little hope that the new Biden administration will change its mind towards supply chain restrictions imposed on Huawei since May 2019, they said. say the two people.
According to the second person, investment companies backed by the Shanghai government can form a consortium with Huawei dealers to take over the P and Mate brands, a model similar to the Honor deal. It is likely that Huawei will also maintain its current P & Mate management team for the new entity, if the deal is maintained, the two people said.
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Huawei, the world’s largest telecommunications equipment provider and No. 2 smartphone maker, announced last November the sale of its budget Honor phone brand to a consortium of 30 dealers led by a company with the support from Shenzhen government.
The second source said the total cash sale earned more than 100 billion yuan ($ 15.5 billion). Honor declined to comment.
The sale of Honor was aimed at keeping the budget mark alive, as sanctions imposed by the United States on Huawei hampered the unit’s supply chain and cut off the company’s access to key hardware, such as chips and software, such as Google’s mobile services from Alphabet Inc.
Huawei may have a similar goal in pursuing the sale of mobile phone brands. The two sources said Huawei’s latest plans for the two high-end brands were motivated by an insufficient supply of chips.
Washington says Huawei is a threat to national security, which Huawei has repeatedly denied.
On Friday, Honor indicated that the goal of the derivation had been achieved by announcing that it had formed alliances with chip makers such as Intel and Qualcomm and launched a new phone.
Last year, the company’s Consumer Business Group CEO Richard Yu said U.S. restrictions meant Huawei would soon stop making Kirin chips. Analysts expect their chip reserve to run out this year.
Huawei’s HiSilicon division relies on software from U.S. companies such as Cadence Design Systems Inc. or Synopsys Inc. to design its chips and outsource production to Taiwan Semiconductor Manufacturing Co. (TSMC), which uses equipment from U.S. companies.
The P and Mate series is among the top players in the high-end smartphone market and competes with Apple’s iPhone, Xiaomi Corp’s Mi and Mix series and OPPO’s Find series.
The two brands contributed 40% to Huawei’s total sales during the third quarter of 2020, according to market research firm Counterpoint.
Analysts have already noted insufficient recent supplies of the P40 and Mate40 flagship series due to a severe shortage of components.
“We expect a steady decline in P and Mate series smartphone sales during the first quarter of 2021,” said Flora Tang, a Counterpoint analyst.
Reports by Julie Zhu, Yingzhi Yang and David Kirton, Additional Reports by Brenda Goh; Edited by Sumeet Chatterjee and Shri Navaratnam