The sudden resignation of Honor CEO George Zhao has raised some eyebrows, as the Chinese smartphone brand's market share continues to decline. Analysts believe that Honor's major shareholders are dissatisfied with Honor's weak sales performance ahead of its IPO.
Honor's fate in the past two years has been tied to Huawei's ups and downs. Honor, a spin-off from Huawei, emerged as a rising star when the former parent company was condemned by US trade sanctions to oblivion in the smartphone market. However, Huawei's return is posing a strong challenge for Honor.
Honor's market share dropping
According to market research firm Canalys, Honor rose to the top of the Chinese smartphone market in the third quarter of 2023, thanks to strong product portfolios and support from distribution channels, with a market share of 18% and shipments exceeding 11.8 million units. It was at a time when Huawei was laying low amid the US sanctions.
However, a year later, the strong comeback of Huawei's high-end models began to unsettle Honor. In the third quarter of 2024, Honor ranked third in China's high-end smartphone market segment above US$600, trailing Apple and Huawei.
In 2024, Huawei launched a number of popular models, including the Mate XT and Nova 13 series, regaining a significant place in the midrange to high-end market segments.
According to Counterpoint Research data, Huawei's market share reached 16.4% in the third quarter of 2024, climbing to second place in China's smartphone market. Huawei was also making aggressive plans to expand its global footprint to more than 60 countries and regions.
At the same time, Honor's market performance gradually declined. Canalys data shows that in the fourth quarter of 2024, Honor fell off the top-5 rankings in the Chinese smartphone market.
IPO bid at stake
Honor's weakening market position is undermining its IPO bid, which was announced in 2023 when it had a strong outlook.
Zhao once publicly disclosed an ambition to have Honor surpass Apple and Huawei and promised to step up efforts for technological innovations, especially in the fields of artificial intelligence (AI) and photography. His ambition was met with skepticism.
Zhao's resignation comes shortly after Honor underwent restructuring and changed its corporate name to Honor Terminal to pave the way for its IPO. Currently, the major shareholder of Honor is the Shenzhen State-owned Assets Supervision and Administration Commission.
Although Zhao stated in his letter of resignation that the company had achieved its profit and sales targets in 2024 and its overall performance was good, his departure actually leaves a heavy burden on his successor, Jian Li, who formerly also worked at Huawei. Li may find himself in an even more challenging role.
Firstly, he needs to curb and reverse Honor's decline in market share. At the same time, he must accelerate the expansions overseas, especially in Europe and Southeast Asia, further enhancing the brand's international visibility.
In December 2023, Zhao revealed that Honor saw more than 50% of its sales come from overseas markets, achieving significant profits from operations in many countries. Honor has just launched the GT series in an effort to further expand its market share in the high-end market segment at home and abroad.
However, competition is coming from not only Huawei but also Xiaomi and Transsion. Xiaomi Group's current market value has already exceeded HKD800 billion (approx. US$102.82 billion), and it has also shown ambitions for the automotive market. Transsion Holdings focuses on overseas markets, with a bigger presence than Honor in emerging markets such as Latin America and Africa.
Li is also tasked with leading Honor to a successful listing. Honor's IPO plan and market valuation are still uncertain. Honor's value was estimated at CNY260 billion (approx. US$35.55 billion) when it was acquired by state-owned capital in 2020, but the latest estimation shows Honor's valuation has dropped to about CNY200 billion.
Article translated by Rodney Chan
