Huawei Technologies Co said on January 25that it has no plans to sell its flagship smartphone brands, as the companyremains fully committed to its smartphone business.

Huawei said in a statement that Huawei haslearned there are unsubstantiated rumors circulating regarding the possiblesale of its flagship smartphone brands.

"There is no merit to these rumorswhatsoever. Huawei has no such plans. We remain fully committed to oursmartphone business, and will continue to deliver world-leading products andexperiences for consumers around the world," Huawei said.

The comments came after some media reportedthat Huawei is in talks to sell its premium smartphone brands P and Mate.

Unsubstantiatedrumors

The reply is a denial of Reuters' previousreport that Huawei is in early-stage talks to sell its premium smartphonebrands P and Mate to a consortium backed by the Shanghai government, two peoplewith direct knowledge of the matter said.

The report said it was a move that couldsee the company eventually exit from the high-end mobile phone business.

The talks between the world’s largesttelecommunications equipment maker and a consortium led by Shanghaigovernment-backed investment firms have been going on for months, the peoplesaid, declining to be identified as the discussions were confidential.

Shenzhen-based Huawei started to internallyexplore the possibility of selling the brands as early as last September,according to one of the sources. The two sources were not privy to thevaluation placed on the brands by Huawei.

Huawei, however, has yet to make finaldecision on the sale and the talks might not conclude successfully, accordingto the two sources, as the company is still trying to manufacture at home itsin-house designed high-end Kirin chips which power its smartphones.

“Huawei has learned there are unsubstantiated rumors circulatingregarding the possible sale of our flagship smartphone brands,” a Huaweispokesman said. “There is no merit to these rumors whatsoever. Huawei has nosuch plan.”

The Shanghai government said it was notaware of the situation and declined to comment further.

The potential sale of Huawei’s premiumsmartphone lines suggests the company has little hope that the new Bidenadministration will have a change of heart towards the supply chainrestrictions placed on Huawei since May 2019, the two people said.

The Shanghai government-backed investmentfirms may form a consortium with Huawei’s dealers to take over the P and Matebrands, according to the second person, a similar strategy to the sale ofbudget smartphone brand Honor.

Huawei is also likely to keep its existingP and Mate management team for the new entity, if the deal goes through, thetwo people said.

Twoflagship smartphone brands

Huawei, with a series of top-of-the-linesmartphones offered under the banner of different brands, has soared past thecompetition to become the world's largest smartphone manufacturer.

In 2013, the company launched the HuaweiAscend P2 and the Ascend Mate that year, and the company introduced the Honorsub-brand to corner the budget smartphone market.

In the following years, Huawei continued tobuild increasingly capable devices. Eventually Huawei shifted to marketing theHuawei P-series and Mate-series smartphones without Ascend in the name.

The Huawei P-Series and Mate-Series weren'tjust Huawei-designed devices but also Huawei-powered devices. They included newchipsets from Huawei's HiSilicon semiconductor manufacturer. As Huaweiintroduced new models, these Kirin chipsets evolved alongside them, offeringsome of the highest performance on the market.

Huawei's P-series and Mate-series ofsmartphones are among the most capable smartphones on the market. Huawei's Kirinchipsets now deliver extreme performance and can support 5G connectivity, andthe phones offer groundbreaking photographic capabilities.

These devices are still coming out on aregular release cycle. In fact, Huawei unveiled the Mate 40 series in Octoberand P40 series in March last year.

Shipments of P and Mate Series smartphoneswere worth $39.7 billion between the third quarter of 2019 and the thirdquarter of 2020, according to market research company IDC.

The two brands contributed nearly 40 per centto Huawei’s total sales over the third quarter last year, according to marketresearch firm Counterpoint.

IDC data also showed that the smartphonemaker's worldwide market share has dropped from 20.2 percent in the secondquarter of 2020 to 14.6 percent in the third quarter of 2020.

The P and Mate series are among the topplayers in the higher-end smartphone market in China, and compete with Apple’siPhone, Xiaomi Corp’s Mi and Mix series, and Oppo’s Find series.

Analysts have already noted recent insufficientsupplies of the flagship P40 and Mate 40 series because of severe componentsshortage.

“We expect a continuous decline in sales of P and Mate seriessmartphones through the first quarter of 2021,” said Flora Tang, an analyst atCounterpoint.

Huawei'ssell-off of Honor

Huawei established Honor in 2013 to competewith Xiaomi, Vivo, and Oppo in the low to mid-end smartphone market, leaving itfree to focus on its higher-end P and Mate Series, whose market is dominated byApple and Samsung.

According to IDC, market intelligenceprovider, although Honor's annual shipment in 2019 of about 70 million unitswas 40 million fewer than Xiaomi's 120 million, domestically, Honor's shipmentof about 40 million surpassed Xiaomi in 2019.

In last November, Huawei announced the saleof Honor to a consortium of 30 dealers led by a company backed by the Shenzhengovernment.

According to the statement, the change ofownership would not impact Honor's development direction, based on a jointstatement between Huawei and the agents and dealers of the Honor brand.

Meanwhile, once the sale was complete,Huawei would "not hold any shares or be involved in any businessmanagement or decision-making activities in the new Honor company."

Huawei had been struggling with U.S.sanctions for a while last year. The selling off of sub-brand Honor was seen asa necessary move by the telecommunication giant because of "tremendouspressure due to a persistent unavailability of technical elements needed,"said Huawei Technologies' founder Ren Zhengfei.

Huawei claimed that its consumer businesshad been under tremendous pressure due to "a persistent unavailability oftechnical elements needed for its mobile phone business".

The deal not only saves the smartphonebusiness from U.S. sanctions but also shakes up the competition and supplychain in the industry. 

Huawei shipped 241 million units in 2019,among them about 75 million were the high-end P and Mate Series, 64 millionwere low- to mid-end Honor brand, and 102 million others.

The second source said the all-cash salefetched more than 100 billion yuan (US$15.5 billion). Honor declined tocomment.

The Honor sale was aimed at keeping thebudget brand alive, as trade sanctions slapped on Huawei by the US had hamperedthe unit’s supply chain and cut off the company’s access to key hardware likechips and software, such as Alphabet’s Google Mobile Services.

Huawei may have a similar objective inpursuing the sale of its premium smartphone brands. The two sources said thatHuawei’s latest plans for the two high-end brands were motivated byinsufficient chip supplies.

Washington has said that Huawei is anational security threat, which the Chinese company has repeatedly denied.

On January 22, Honor launched a newsmartphone and indicated that the goal of the spin-off had been reached byannouncing it had formed partnerships with chip suppliers such as Intel Corpand Qualcomm.