(Reuters) – China’s Huawei Technologies Co Ltd is in the early stages of negotiations to sell its premium smartphone brands P and Mate, said two people with direct knowledge of the matter, a move that could lead the company to abandon the latest smartphone generation -do business.
Negotiations 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 discussions were confidential.
Huawei began to explore internally the possibility of selling the brands as early as last September, according to one of the sources. Both sources were unaware of the assessment made by the brands by Huawei.
Shipments of Mate and P Series phones were worth $ 39.7 billion between the third quarter of 2019 and the third quarter of 2020, according to consultancy IDC.
However, Huawei has yet to make a final decision on the sale and negotiations may not be completed successfully, according to the two sources, as the company is still trying to manufacture its high-quality Kirin chips designed in-house at home. power your smartphones.
“Huawei has learned that there are unfounded rumors circulating about the possible sale of our major smartphone brands,” said a Huawei spokesman. “There is no merit to these rumors. Huawei does not have such a plan. “
The Shanghai government said it was not aware 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 government will change its heart regarding the supply chain restrictions imposed on Huawei since May 2019, the two people said.
Investment firms supported by the Shanghai government may form a consortium with Huawei resellers to acquire the P and Mate brands, according to the second person, a model similar to the Honor agreement. Huawei must also retain its existing P & Mate management team for the new entity, if the deal is approved, the two people said.
OVERCOMING CURBS
Huawei, the world’s largest supplier of telecommunications equipment and No. 2 smartphone maker, announced last November the sale of its brand of cheap Honor phones to a consortium of 30 resellers led by a company supported by the Shenzhen government.
The second source said the cash sale earned more than 100 billion yuan ($ 15.5 billion). Honor declined to comment.
The Honor sale was intended to keep the budget mark alive, as the sanctions imposed on Huawei by the United States damaged the unit’s supply chain and cut the company’s access to key hardware such as chips and software such as Google Mobile Services from Alphabet Inc.
Huawei may have a similar goal in pursuing the sale of cellphone brands. Both sources said Huawei’s most recent plans for the two high-end brands were driven by insufficient chip supplies.
Washington says Huawei is a threat to national security, which Huawei has repeatedly denied.
On Friday, Honor indicated that the goal of the spin-off was achieved by announcing that it had formed partnerships with chip makers like Intel and Qualcomm and launched a new phone.
Last year, chief executive of the company’s Consumer Business Group, Richard Yu, said the U.S. restrictions meant that Huawei would stop making Kirin chips soon. Analysts expect their chip stock to run out this year.
Huawei’s HiSilicon division relies on software from American 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 American companies.
The P and Mate phone series are among the main players in the high-end smartphone market in China and compete with Apple’s iPhone, Xiaomi Corp’s Mi and Mix series and OPPO’s Find series.
The two brands contributed almost 40% to Huawei’s total sales in the third quarter of 2020, according to market research firm Counterpoint.
Analysts have noted recent insufficient supplies of the main P40 and Mate40 series due to a severe shortage of components.
“We expect a continued decline in sales of smartphones in the P and Mate series 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; Editing by Sumeet Chatterjee and Shri Navaratnam