Everyone knows the history of Huawei. In 2019-2020, the US government decided to ban Huawei and many other Chinese companies from using any hardware or software from the US. This made the former Chinese tech giant make painful decisions. First, Huawei released its Honor subsidiary. The latter was tasked with boosting Huawei’s sales on online platforms. Second, Huawei accelerated the development of its own operating system, Harmony OS. Third, although the company did not withdraw from the smartphone market, it decided to change its focus to smart home appliances, car vehicles and widescreen products. In short, Huawei before 2020 and Huawei after the year are two different companies. But has Huawei successfully outsourced the smartphone business to Honor? Well, let me rephrase the question. Could Honor handle Huawei’s work and completely replace Huawei?
Further reading: Bye-Bye Huawei! The price surpassed its master by conquering China
200% growth rate in China
Recently, Canalys published a report. According to her, in China, smartphone shipments fell sharply by double digits in the first quarter. In total, the companies were able to sell 75.6 million units, ie a decrease of 18% on an annual basis and a quarterly decline of 13%. This is the worst result in eight quarters.
These results are at the same level as in 2020. However, after the mitigation of the epidemic situation, the Chinese smartphone market grew by 27%. In the first quarter of 2022, the epidemic returned to fog. So this seems to be a Deja vu.
When we talk about a 20% drop in the Chinese smartphone market, there is every reason to believe that all smartphone makers in this region will be affected. But this is not about price. Shipments of the former Huawei brand increased by more than 200% from year to year. In addition, its market share reached 20%. Honor and Apple are the only brands developing. So we can say that Honor performs like the most experienced Apple.
Of course, the market evacuated by Huawei is still catching the eye of mobile phone manufacturers. But only Honor could fill the gap. Its shipments increased by 6% quarter on quarter. In other words, Honor could only reach such heights due to hard work.
On the other hand, we still can not compare Honor with the peak of Huawei. During 2019 and 2020, Huawei mobile phone shipments in each quarter could reach a staggering 30 million or even 40 million units. Thus, Huawei had a gap of 15 million or even 25 million units compared to other brands. In this sense, although Honor took second place in the first quarter of 2022, OPPO, which was in third place, sold only 200,000 units less.
Will Honor be on the list?
Recently, we heard that Honor is considering listing on the domestic stock exchange in 2022, seeking a valuation of $ 45 billion. Although Honor has denied the rumors, we still believe it will happen in the near future.
On April 25, 2022, in an interview, Honor CEO Zhao Ming said that since its independence from Huawei, Honor’s performance has grown steadily.
“Differentiation of shareholders and capital is the concept of business. The latter can attract more resources to help the business grow. “
We assume that it is a clear indication that Honor intends to land in the capital market.
In addition, in November 2020, some confidential individuals stated that after the sale by Huawei, Honor would retain most of its management team and more than 7,000 employees and plans to go public within three years.
In August 2021, Honor distributors said that Honor has notified key distributors that they may be listed on the stock exchange in the near future and may buy original shares with a subscription amount ranging from 5 million to 50 million yuan ($ 750,000 – 7 , $ 5 million).
In early April 2022, some Honor employees revealed that Honor required employees to purchase shares in the company.
After independence, Honor will be completely free of the negative impact of Huawei. But through its multi-layered equity structure, Honor still has a strong government assets background. This may bring some policy risks to Honor.
Not to repeat Huawei’s mistakes
For example, in August 2021“A group of 14 Republican lawmakers in the United States House of Representatives on August 6 asked the US Department of Commerce to add the former Huawei Honor smartphone to the government’s official financial blacklist.”
If Honor can land successfully in the capital market, the share of private equity will increase. So in the future, like Xiaomi, it can freely buy European and American semiconductors. In this respect, the registration is of great importance both for the reduction of Honor’s business risks and for the continuation of its expansion.
However, there are serious difficulties in getting Honor on the list. The financial model for listing is that the company must make successive profits in the last three financial years. In addition, the accumulated net profit should exceed 30 million yuan ($ 4.5 million). Given that Honor has only been independent for about a year and a half, it obviously does not meet the requirements.
Honor is not Huawei yet. But the company is constantly growing. If it does not repeat the mistakes made by Huawei, there is every reason to believe that Honor will compete with the leading brands in the global market. But will the US allow the emergence of a new Huawei?