Since the Trump administration cracked down on Huawei, initially banning the company from selling products in the United States and eventually from working with any American companies, the Chinese conglomerate has been effectively banned from making any phones and tablets. To address this, Huawei has sold its Honor sub-brand to a consortium, allowing the former unit to use both Android and US-designed processors, but the company is still struggling to fill a financial hole left by the lack of new homemade Android phones. According to Bloomberg, Huawei is now working on a new plan to circumvent some of the bans. It wants to license its smartphone designs to third-party manufacturers.
Bloomberg, citing "people familiar with the matter," said the solution would give Huawei access to key components that it cannot obtain on its own, such as processors and other key smartphone components. A third-party state-owned company, China Postal and Telecommunications Appliances Co., has already sold Nova phones such as Huawei's Nova 9. As it happens, this phone is almost identical to the Honor 50. Huawei and PTAC will deepen their relationship so that they can sell their own branded phones based on Huawei's licensed hardware designs.
Given that Huawei's consumer business could falter in the wake of recent sanctions, the move may be the company's only option to stay relevant and keep its research and development arm running. Once the manufacturer completely leaves the market, it may become increasingly difficult to fight back, especially when it will have to improve its business from scratch due to changes in the political environment or due to components made entirely in China. So this licensing model can be a perfect temporary solution. Indeed, Huawei hopes the partnership will boost its sales again, which are expected to exceed 30 million next year. However, there has been no official comment from Huawei or its partners. So it remains to be seen whether the deal will happen.
While many expect the new Biden administration to back down on the ban, it has shown no signs of changing course. Huawei's current impasse could be a good bargaining chip in normal bilateral negotiations, so that is unlikely to change fundamentally any time soon.
Given that Huawei's consumer business could falter in the wake of recent sanctions, the move may be the company's only option to stay relevant and keep its research and development arm running. Once the manufacturer completely leaves the market, it may become increasingly difficult to fight back, especially when it will have to improve its business from scratch due to changes in the political environment or due to components made entirely in China. So this licensing model can be a perfect temporary solution. Indeed, Huawei hopes the partnership will boost its sales again, which are expected to exceed 30 million next year. However, there has been no official comment from Huawei or its partners. So it remains to be seen whether the deal will happen.
While many expect the new Biden administration to back down on the ban, it has shown no signs of changing course. Huawei's current impasse could be a good bargaining chip in normal bilateral negotiations, so that is unlikely to change fundamentally any time soon.
