(Reuters) – China’s Huawei Technologies Co Ltd is in the early stages of selling its premium brands of P and Mate smartphones, said two people with direct knowledge of the matter, a move that could see the company come out on top. the end of the high-end smartphone – doing 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, refusing to be identified because the talks were confidential.
Huawei has been exploring internally the possibility of selling the brands since September last year, according to one of the sources. The two sources were not aware of Huawei’s assessment of the brands.
Mate and P series phone deliveries were worth $ 39.7 billion between Q3 2019 and Q3 2020, according to IDC consulting.
However, Huawei has not yet made a final decision on the sale and talks may not end successfully, according to the two sources, as the company is still trying to produce its high-quality, internally designed Kirin chips at home. smartphones.
“Huawei has learned that there are unfounded rumors about the possible sale of our flagship smartphone brands,” a Huawei spokesman said. “There is no merit in these rumors. Huawei does not have such a 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 have a change of heart over Huawei’s supply chain restrictions imposed in May 2019, the two said.
Investment firms backed by the Shanghai government could form a consortium with Huawei dealers to take over the P and Mate brands, according to the second person, a model similar to the Honor agreement. Huawei is likely to keep its existing P & Mate management team for the new entity if the transaction is completed, the two said.
LEAVING NEW CURVES
Huawei, the world’s largest telecommunications equipment maker and No. 2 smartphone maker, announced in November last year the sale of its Honor budget phone brand to a consortium of 30 dealers led by a Shenzhen-backed company. .
The second source said the total cash sales brought in more than 100 billion yuan ($ 15.5 billion). Honor declined to comment.
The Honor sale was intended to keep the budget brand alive, as sanctions hit by Huawei in the United States hampered the unit’s supply chain and disrupted the company’s access to key hardware such as chips and software such as Google services. Alphabet Inc.
Huawei could have a similar goal in pursuing the sale of mobile phone brands. The two sources said that Huawei’s latest plans for the two state-of-the-art brands were motivated by insufficient supply of chips.
Washington says Huawei is a threat to national security, which Huawei has repeatedly denied.
On Friday, Honor indicated that the spin-off goal was achieved by announcing that it had formed partnerships with chip manufacturers such as Intel and Qualcomm and launched a new phone.
Last year, Consumer Business Group CEO Richard Yu said US restrictions mean Huawei will soon stop producing Kirin chips. Analysts expect the stock of chips to run out this year.
Huawei’s HiSilicon division relies on software from US 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 US companies.
The P and Mate series are among the top players in the state-of-the-art smartphone market in China and compete with the Apple iPhone, Xiaomi Corp’s Mi and Mix series and the Find OPPO series.
The two brands contributed nearly 40 percent to Huawei’s total sales in the third quarter of 2020, according to market research firm Counterpoint.
Analysts have already noted the recent insufficient supply of the P40 and Mate40 pilot series due to the severe shortage of components.
“We expect a steady decline in sales of P and Mate series smartphones until the first quarter of 2021,” said Flora Tang, an analyst at Counterpoint.
Reporting by Julie Zhu, Yingzhi Yang and David Kirton, Additional reporting by Brenda Goh; Edited by Sumeet Chatterjee and Shri Navaratnam