Huawei has sold off its Honor smartphone brand to Shenzhen Zhixin New Information Technology after experiencing “tremendous pressure,” the company said Monday.

In a news release, Huawei said the sale will “help Honor’s channel sellers and suppliers make it through this difficult time.” Huawei will not hold any shares or be involved in any business management or decision-making activities in the new Honor company once the acquisition completes.

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Huawei tiered its smartphone business into two brands. The value-oriented Honor brand offers the highest value, while phones with the Huawei brand focus primarily on the high-end with cutting-edge features.

In its 2019 financial report, Huawei reported that the two brands collectively shipped more than 240 million smartphones in 2019, a 15 per cent increase year-on-year, of which 6.9 million are 5G smartphones.

But the business suffered under the impact of the COVID-19 pandemic and tightened U.S. sanctions. According to IDC, Huawei lost the top spot of worldwide smartphone sales to Samsung in Q3 2020. The report noted that Samsung overtook Huawei after shipping 80.4 million smartphones this year, capturing 22.7 per cent of the global smartphone market. Huawei now sits at 51.9 million units sold in 2020 with a global market share of 14.7 per cent, a 22 per cent drop year over year.

“This move has been made by Honor’s industry chain to ensure its own survival,” wrote Huawei’s news release.

Since the U.S. sanction against Huawei began in 2019, Huawei has lost several key business partners including Google and TSMC. It’s unclear whether Honor’s separation could help it circumvent the myriad of restrictions.

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