U.S. President Donald Trump’s aggressive approach has triggered the merger activity. His administration’s designation of ByteDance-owned TikTok as a national security threat prompted a wild and messy auction of the video app. There has been confusion about what exactly is being sold. Beijing also intervened in the process. And last week the U.S. Treasury extended the deadline yet again for the agreed minority stake sale to Oracle.
Trump’s Commerce Department also put Huawei on a blacklist that prevents American companies from supplying it. That cut the Chinese telecommunications equipment giant’s access to everything from Google’s Android operating system to Arm’s chip designs. More recently, Washington tightened restrictions again, making it virtually impossible for Honor to compete with Xiaomi and other domestic rivals.
Knowing its stockpiles of components would eventually run out, Huawei found a potential lifeline. Details were scarce, but Reuters reported talks with a different suitor last week at a price tag of about $15 billion. That would provide Huawei with a useful cash injection as it continues to grapple with American constraints and tumbling sales while it tries to develop its own chips and smartphone operating system.
Shenzhen-based Huawei said on Tuesday that it would not have a stake in the new owner, Shenzhen Zhixin New Information Technology, but the transaction is nevertheless muddled. The brand will remain the same and the existing management and research teams are to stay in place, according to Reuters. Honor’s buyer is a group of more than 30 agents and dealers backed by an outfit controlled by Shenzhen’s state asset regulator, according to Chinese corporate information app Tianyancha.
The arrangement leaves room for U.S. regulatory scepticism. And the slapdash and capricious approach to the TikTok sale only adds to the uncertainty. The best Chinese companies can hope for at this stage is more consistent enforcement under President Joe Biden.