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Huawei crackdown

Former Huawei unit plans to churn out 100m smartphones in 2021

Honor needs US government help to procure from Qualcomm and other suppliers

Honor does not know if the parts it will need to make 100 million smartphones next year will be subject to U.S. export controls.   © Reuters

TOKYO -- Honor, Huawei Technologies' low-end smartphone unit, plans to increase production by 40%, to about 100 million units, in 2021 and has sounded out U.S. parts makers about supplies, Nikkei has learned.

Huawei spun off the brand last month in an attempt to get around a U.S. export ban. Now as the unit plans to boost production, uncertainties linger as to whether it will be able to procure parts -- a matter that can only be settled by a decision from the U.S. government.

According to multiple suppliers, Honor in 2021 plans to make some 100 million phones while Huawei plans to ship nearly 60 million. The combined 160 million devices represent a decline of about 20% from Huawei's overall production plan for 2019.

Honor and Huawei declined to comment on the plan.

Huawei launched the budget line in 2013 to complement its own premium brand amid intensifying competition with Xiaomi and other budget handset makers, with China its main market.

An investment company funded by the municipal government of Shenzhen, Guangdong Province, will provide funding for the new spinoff.

The U.S. in September effectively banned U.S. companies from supplying chips using their own technologies to Huawei, making it difficult for the company to produce smartphones.

Suppliers plan to sign procurement agreements with Honor later this month, but whether they can actually supply parts will be up to the U.S. Department of Commerce.

Cristiano Amon, president of Qualcomm, early this month said the leading mobile chipmaker has held preliminary talks with Honor executives and that Qualcomm is pleased that the market has a new entrant.

Rick Tsai, CEO of MediaTek, a Taiwan-based company that supplies Huawei and Honor with key mobile processors, said his company has talked to legal consultants and is evaluating whether it can supply Honor and comply with U.S. controls at the same time.

Huawei in the April-June quarter was No. 1 in global smartphone shipments for the first time but in the next quarter was overtaken by South Korea's Samsung Electronics.

Huawei held a 14.7% share of the global smartphone market in the July-September quarter, down 5.3 percentage points from the previous quarter, due to U.S. sanctions, according to U.S. market researcher IDC.

Among the factors that will play a role in the U.S. Department of Commerce's upcoming decision is whether incoming President Joe Biden, who will be inaugurated on Jan. 20, will carry over policies of the Donald Trump administration.

Additional reporting by Cheng Ting-Fang and Lauly Li in Taipei.

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