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China's government shadow behind Huawei's 'Honor detachment'

Cover lesser-known topics about Taiwan and the Asian region

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Huawei and Honor (Photo credit should read Costfoto/Barcroft Media via Getty Images)

China's Huawei announced on November 17 that it would sell its mobile phone division sub-brand "Honor" to a government-affiliated consortium. Huawei is unable to obtain US-made chips due to the US government's embargo. Separated from the company, Honor would be able to circumvent U.S. government regulation, but would lose access to Huawei's resources. Analysts also warned that Honor could face new US government regulations. "This move is a move by Honor to ensure its own survival. Huawei's consumer business has been under tremendous pressure lately, but this is a necessary step for our smartphone business to sustain the technological component." due to the unavailability of the service," Huawei said in a statement. According to the company's announcement, Shenzhen Zhixin New Information Technology will acquire all of Honor's assets and rescue the supply chain. The acquisition comes as a result of a proposal from a consortium of more than 30 distributors and dealers with ties to Honor. The consortium was founded by a government-run Shenzhen smart city-related group and includes government-backed energy companies, healthcare companies and investment firms. Also participating is Group, a sports, retail and entertainment conglomerate that is one of China's largest private companies. Kiranjeet Kaur, chief analyst for Asia Pacific at IDC, said, "This move will extend Honor's lifespan, but it will also mean that Honor will lose its synergy with Huawei." "The two companies have historically shared R&D and design departments, but it's unclear how much the separation will cost, and how Honor will differentiate going forward." >Buyers are government-affiliated groups In addition, the US may be wary of the deep ties between the consortium that led the acquisition and the Chinese government. “The people behind this acquisition are not strategic investors, but groups with deep government ties,” said Alexander Shirakov, a Chinese financial technology analyst. U.S. president-elect Joe Biden is unlikely to drop sanctions against Huawei for the foreseeable future as he focuses on domestic issues, but he may not add new sanctions either. Huawei did not mention US sanctions in its statement. Honor was launched in 2013 as a budget brand, averaging around $156 in emerging markets in Asia. "We look forward to the new Honor embarking on a glorious new path," Huawei said.

Edited by Yusuke Ueda

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