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Huawei crackdown

Honor secures access to chip supplies after Huawei spinoff

Smartphone maker unveils first handset since splitting from China tech titan

TAIPEI -- Honor, the former budget smartphone arm of Huawei Technologies, says it has secured access to vital chip supplies after it was spun off from its parent last year in a move to shield it from Washington's crackdown on the Chinese tech giant.

Honor on Friday unveiled its first new smartphone since becoming an independent company, saying it plans to expand overseas and break into the premium smartphone segment. The brand is currently sold primarily in China, where it has made a name for itself with affordable phones.

The new phone, dubbed the V40, is will go on sale online in China immediately with a starting price of 3,599 yuan ($557), slightly cheaper than the premium offering of its domestic rival Xiaomi.

"It has been very tough in the past five months," Honor CEO Zhao Ming said at the release. "But the blessings and encouragement from consumers and the industry gave us courage. Honor will confidently, bravely face everything, and the new Honor that is independent will keep its glory of the past and continue to innovate."

Honor says it has confirmed partnerships with leading suppliers such as AMD, Intel, MediaTek, Micron Technology, Microsoft, Qualcomm, Samsung, SK Hynix and Sony. These companies, like other global tech suppliers, are subject to U.S. restrictions on using American technology to supply Huawei. However, some of suppliers have said they are still evaluating the legal implications of shipping to Honor.

The new V40 smartphone is powered by MediaTek's Dimensity 1000+ 5G mobile chip platform, the second-most-recent generation of the 5G phone chips from the Taiwanese developer of mobile processors. The latest version of the chipset, the Dimensity 1200, was unveiled on Wednesday. It also boasts a flexible curved OLED display, a premium feature found on most high-end smartphones, including the latest iPhone 12 range.

"Although we are using the similar chipsets to our rivals, our engineering team has implemented many of our own technologies to offer better performance on the same set of chips," Zhao said.

He said that in terms of performance and 5G connection, the V40 is at least on par with Oppo's Reno 5 Pro, which was introduced in December, and Samsung's premium Galaxy Note 20 and the iPhone 12 Pro.

Honor also launched two new notebooks, the MagicBook 14 and Magic 15, powered by Intel's CPU and Nvidia's graphic card, and the GS Pro smartwatch to expand its product ecosystem.

While Honor is not using the most recent MediaTek 5G chipset, rivals such as Huami, the budget line of Xiaomi, and Realme, an emerging budget phone brand sharing Oppo's manufacturing resources, have already announced they will.

Honor is in talks to secure the latest chips from both MediaTek and Qualcomm, the world's two biggest mobile processor builders, sources told Nikkei Asia. The current launch uses the chip inventories that Huawei stockpiled and transferred to the newly independent company last year, they said.

Some electronic component suppliers told Nikkei Asia that Honor is booking enough components for at least 60 million to 70 million smartphones this year. Honor even told some suppliers that it may need components for up to 100 million units for the year, underlining the company's desire to secure supplies amid a worldwide component shortage.

MediaTek Corporate Vice President J.C. Hsu told reporters on Wednesday that the chip developer is happy to work with all smartphone makers but is still evaluating the legal implications of supplying the newly formed Honor. "We would not rule out forging a deep collaboration once all the [legal] issues are cleared," Hsu said. Qualcomm's CEO-elect, Cristiano Amon, also said his company is in negotiations with Honor for possible collaboration.

Analysts are cautious about whether Honor can reach its ambitious production target.

"We are still concerned about its access and its bargaining power to secure enough chips when all the other smartphone makers are also racing to secure chips and components," said Jeff Pu, an analyst with GF Securities. "Meanwhile, whether Honor could still stand out in the market competition without the protection of Huawei remains to be seen." Pu said his agency forecasts Honor could ship 55 million smartphones this year, but the number could be revised lower, as there are still uncertainties.

Huawei announced in November it was selling Honor to a consortium of 30 Chinese companies, including entities backed by the Shenzhen local government, where the Chinese tech champion's headquarters is located. The previous year, Huawei shipped 240.6 million smartphones, of which Honor accounted for 68.7 million, mainly in the Chinese market, Counterpoint Research data showed.

Spinning off the unit was viewed as the first visible casualty of Washington's move to cut off Huawei's supplies of vital electronic components. Huawei's rivals, including Samsung, Oppo, Xiaomi and Vivo, were aggressively grabbing market share from the embattled company. Setting up the Honor unit as an independent player, the company hoped, would allow its once-thriving smartphone business to survive in some form.

Huawei founder Ren Zhengfei had described spinning off Honor as a "divorce" and encouraged employees and executives who were transferred to Honor to act as if they were Huawei's strongest competitors.

Former Huawei consumer electronics group COO Wan Biao, who oversaw Huawei's supply chain management, is now chairman of Shenzhen Zhixin New Information Technology, the entity formed last September to take control of the overall Honor business. Some 7,000 Huawei employees -- including the original Honor business unit boss, Zhao Ming -- have been transferred to the new entity, and the transfer also included a key research and development engineering team on smartphones and other consumer electronic devices, Nikkei learned.

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