Huawei Technologies is to sell its budget smartphone brand business Honor to a consortium of more than 30 agents and dealers which include appliance retailer Suning.
The move follows increasing US restrictions on supplying Huawei Technologies on grounds the firm is a national security threat – which it denies.
Suning, which counts Alibaba as a cornerstone shareholder, is one of the buyers to be listed, along with several state-owned investment firms in Huawei’s hometown of Shenzhen.
A Reuters source said Honor will look for more investment partners in the future, with the possibility of an eventual listing
The consortium issued a statement on Tuesday announcing the purchase, which will be made via a new company, Shenzhen Zhixin New Information Technology. Huawei will not hold any shares in the new Honor company after the sale, the statement said.
Huawei said its consumer business has been under “tremendous pressure” due to the “persistent unavailability of technical elements” for its phone business.
“This move has been made by Honor’s industry chain to ensure its own survival,” Huawei said.
The change of ownership will not impact Honor’s development direction, both statements said.
No figure for the deal was given.
Sources with knowledge of the matter say the US government restrictions have forced the world’s second-biggest smartphone maker – after South Korea’s Samsung Electronics – to focus on high-end handsets and corporate-oriented business. One source said on Tuesday the US government will have no reason to apply sanctions to Honor after it separates from Huawei.
Honor sells smartphones through its own websites and third-party retailers in China, where it competes with Xiaomi , Oppo and Vivo in the lower-priced handset market. It also sells phones in Southeast Asia and Europe, and ships 70 million units annual, according to the Huawei statement.
Reuters reported earlier this month that Huawei was in talks to sell Honor in a $15.2 billion deal to a consortium led by handset distributor Digital China and the government of Shenzhen.
The source said Digital China was not part of the final buyer group.
Huawei has said its higher-end smartphone line is under threat from the US sanctions, with the head of its consumer business saying in August that it would be unable to continue making the Kirin chips that power its premium models.
- Original reporting by David Kirton; Editing by Sonya Hepinstall at Reuters.