Will Honor repeat the fate of Huawei. Does she have a future

Everyone knows the history of Huawei. In 2019-2020, the US government decided to ban it and many other Chinese companies from using any equipment or software made in the US or related to this country.

To survive itself, Huawei has accelerated the development of its own operating system Harmony OS, and, although it has not left the smartphone market, it has decided to shift its focus to smart home appliances, cars and large-screen products.

In short, Huawei before 2020 and Huawei after are two different companies. But has Huawei successfully transferred its smartphone business to Honor?

How is Honor doing?

Recently, the analytical agency Canalys released a report . According to him, in China, shipments of smartphones in the first quarter fell sharply, expressed in double digits. In total, companies were only able to sell 75.6 million units, down 18% from the previous year and down 13% from the previous quarter. This is the worst result for eight quarters – for 2 years.

These results are in line with 2020 figures. However, after the pandemic situation eased, the Chinese smartphone market achieved growth of 27%. In the first quarter of 2022, the pandemic began to remind of itself again. So it’s like deja vu.

Join us on Telegram!

Nobody buys Chinese phones

Speaking of a nearly 20% decline in the Chinese smartphone market, there is every reason to believe that this will affect all smartphone manufacturers in the region.

But this is not the case and does not apply to Honor. Shipments of the former Huawei brand have grown by more than 200% (!) compared to last year.

Plus , its share has reached 20% of China’s total smartphone market. Honor and Apple are the only brands that are growing in this region.

Of course, the market vacated by Huawei is still attracting the attention of mobile phone manufacturers. But only Honor could fill this gap . Largely due to the association with its former parent brand.

Its shipments increased by 6% compared to the previous quarter. In other words, Honor was able to achieve such heights not only thanks to hard work, but also to the origin.

Personally, I have always liked Huawei, and now Honor has more or less been able to take its place. Here is such a succession.

Comparison of Honor and Huawei

On the other hand, we still can’t compare Honor’s results to Huawei’s at its peak. During 2019 and 2020, Huawei mobile phone shipments reached an astounding 30 or even 40 million units every quarter.

Thus, Huawei sold 15 million or even 25 million more phones than other brands. In this metric, Honor ranked second in the first quarter of 2022, OPPO, which was in third position, sold only 200,000 units less.

We recently learned that Honor is considering entering the Chinese stock market in 2022 with the goal of reaching a valuation of US$45 billion. Although the company has denied the rumors, we still believe that this will happen in the near future.

On April 25, 2022, in an interview, Honor CEO Zhao Ming said that since independence from Huawei , his company’s performance has grown steadily.

He also added that changing the number of shareholders and capital structure is the meaning of his work. This can attract more resources for further development.

Moreover, in November 2020, some insiders said that after the sale, Huawei Honor will retain most of its management team and more than 7,000 employees . They also talked about entering the stock market within three years.

Does Honor have a relation to Huawei

After gaining independence, Honor will completely get rid of the negative influence of Huawei. But thanks to the tiered equity structure, the company will still have a strong track record of working with state assets. This may already lead to certain political risks for Honor.

For example, in August 2021, lawmakers in the US House of Representatives asked the Department of Commerce to add Honor to the government’s official economic blacklist . These are the threats that a company can face with growth without a clear and emphasized separation from Huawei.

If Honor succeeds in entering the capital market, the share of private shares will increase. So in the future, like Xiaomi, it will be able to freely purchase European and American semiconductors .

From this point of view, the share offering is of great importance both for reducing Honor’s business risks and for further expansion. It seems like it’s more important to design good phones, but that’s not as important as good leadership.

Can Honor Survive?

However, there are serious difficulties for Honor to follow the described path. The placement of shares requires the company to have made consistent profits over the past 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’s obviously not up to the mark.

This means that it has at least another year and a half of existence with the risk of falling under sanctions. In this case, nothing will save her.

So, now she needs to distance herself as much as possible from Huawei and not give a reason to think that she is working for the Chinese leadership. Let me remind you that Huawei was accused of this at one time and that is why sanctions were imposed.

Honor has not yet reached the level of Huawei, but the company is constantly growing . If it does not repeat the mistakes of the former parent brand, there is every reason to believe that it will compete with the leading brands in the global market.

But will the US allow a new Huawei? This is what we will find out over the next one and a half to two years.