The beleaguered Chinese tech giant Huawei said on Tuesday that it would sell its budget smartphone brand, Honor, to a Chinese state-owned entity, in a sign of the strain the company is under as the Trump administration’s restrictions on its business start to bite.
Huawei did not disclose the size of the sale. The company said that once the transaction was complete, it would not hold any shares in the new Honor business or be involved in its management.
The Trump administration has long called Huawei a threat to American national security, and it now effectively dictates the company’s ability to buy many of the components and software in its smartphones and telecommunications gear. Huawei is one of China’s most revered tech success stories. Yet its products have used a range of specialized parts made by American companies, as well as computer chips manufactured using American software and equipment. Many of Huawei’s suppliers now need licenses from the U.S. government to sell to it.
“Huawei’s consumer business has been under tremendous pressure as of late,” the company said in a statement on Tuesday announcing the Honor sale. “This has been due to a persistent unavailability of technical elements needed for our mobile phone business.”
Honor, created in 2013, is Huawei’s youth-oriented gadget brand. The company that is buying it, Shenzhen Zhixin New Information Technology, is owned mostly by an entity backed by the government of the city of Shenzhen, where Huawei is headquartered. Once Honor is in new hands, it would likely not be subject to the U.S. export restrictions that bind Huawei.
Huawei was the world’s second biggest smartphone seller in the latest quarter, according to the research firm Canalys. But the company’s uncertain future has caused its sales in key markets outside China, such as Europe, to fall sharply.