After weeks of speculation, Huawei has confirmed it is selling its Honor sub-brand of smartphones to a separate company so the brand can "make it through this difficult time".
Huawei confirmed the sale in a blog post, where it stated the Honor brand will be sold to Shenzhen Zhixin New Information Technology Co., Ltd., and it will see that company acquire all the business assets.
That means both Honor’s employees and management will be sold, and Huawei will no longer own any shares in the brand or participate in the management or decision-making.
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This could imply that Honor will now have to design smartphones from the ground up, without the help or technology of its current parent company, which invests a lot of time and money into research and development.
That may mean future Honor phones differ tremendously from Huawei devices, and it's currently unclear if the company will continue to use features like EMUI software, which the brand inherited from Huawei on previous phone releases.
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The statement says that the acquisition represents a market-driven investment made to save Honor’s industry chain - consumers, channel sellers, suppliers, partners, and employees.
It also says Huawei believes this will be a major win for the industry as a whole.
Essentially, this sounds like the Honor brand will be trying to regain access to Google Mobile Services. Those are particular Android services - such as the Google Play Store and YouTube - that aren't available on recent Huawei or Honor products.
That's because the Honor brand was also affected by the Huawei ban that has seen the company restricted in its use of a variety of US products. This began at the start of 2019, and it has impacted a lot of Huawei and Honor products since then.
Ben Wood, Chief of Research at CCS Insight, told TechRadar, "At this stage there is a distinct lack of detail on the next steps making it hard to understand what direction the new business will take and how it will recover.
"We assume that the goal will be for the new independent company to re-establish ties with Google and component suppliers.”
Although the brand doesn't specifically say regaining access to Google Mobile Services will be the company's next move, it would make sense if the company wants to re-establish Honor in markets such as the UK and other parts of Europe.
What next for Honor?
Wood continues, “At its peak, Honor was shipping 70 million phones annually. Given its historic dependence on Huawei for product development and scale it will be interesting to see whether an independent entity will be able to recover.”
Echoing our point on the close-knit relationship between Honor and Huawei phone development, this likely means we'll see drastically different devices from both brands in the future.
“The Honor brand was historically focused on mid- and low-tier devices targeted at younger customers," said Wood. "This is one of the most competitive Android smartphone product segments so this new version of Honor will need to work hard to compete with rivals such as Realme and Xiaomi who have been aggressively focused on this market opportunity as Honor sales have declined.”
Competition in Honor's cheaper smartphone sphere has become fiercer over the last year and a half where Honor hasn't been such as big focus for consumers, so the brand will have to work hard to compete with its biggest rivals.
If the Google Play Store does return to Honor smartphones, that will make those devices much more desirable to the average person, and we may see the brand's sales grow again outside of its home base of China.
It's also important to note that this sale isn't complete, so there may be some more changes to the deal in the future. We hope to learn more about the deal in the coming months, including when we can expect the brand to be sold.
Another element left unclear is how this will impact Huawei itself, as this doesn't solve the issue that the company isn't able to include some of the most useful Android features on its flagship phones like the Huawei P40 Pro and Huawei Mate 40 Pro.