In a bold move to bolster its technological capabilities, the renowned Chinese smartphone brand Honor, once a sub-brand of Huawei, has recently unveiled a new subsidiary solely dedicated to chip design. This strategic maneuver comes in the wake of rival company Oppo’s decision to disband its in-house chip unit, resulting in significant layoffs. Honor’s new subsidiary, named Shanghai Honor Intelligent Technology Development Co, was established with a registered capital of 100 million yuan ($14 million) and is situated in Shanghai’s Lingang Free Trade Zone. Operating under the ownership of Honor Terminal Co, this subsidiary is poised to make waves in the industry.
The Primary Focus of Honor’s New Chip Design Subsidiary Honor’s new subsidiary has set its sights on chip design, sales, related services, and the development of artificial intelligence (AI) application software. It is worth noting that the company has outlined a strategic vision for this subsidiary, positioning it as one of its five research centers in China. The subsidiary will place particular emphasis on core software, graphics algorithms, communications, and photography. The other research centers are strategically located in Beijing, Shenzhen, Xian, and Nanjing, underscoring the brand’s commitment to innovation and research and development.
Industry Dynamics: Honor’s Move in Light of Oppo’s Restructuring The decision by Honor to establish a chip design subsidiary has sparked considerable attention, especially following Oppo’s disbandment of its chip design team and the subsequent release of numerous engineers. While Oppo cited uncertainties in the global economy and smartphone market as reasons for the decision, speculation surrounding non-financial factors, such as the geopolitical tensions between the United States and China, has emerged. Honor’s move is a testament to its proactive approach and determination to thrive in a highly competitive market.
Xiaomi’s Commitment to Chip Development In stark contrast to Oppo’s course of action, another major Chinese smartphone vendor, Xiaomi, has recently reaffirmed its unwavering commitment to chip development. Xiaomi views chip development as a vital component of its core business, necessitating substantial long-term investments. This stands as a testament to the significance of chip design in the ever-evolving smartphone landscape and the potential competitive advantage it offers to companies.
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Honor’s Adaptive Chip Strategy Zhao Ming, the CEO of Honor, has articulated that the brand’s chip strategy will be guided by specific requirements. The decision to pursue in-house chip development or collaborate with external partners will be determined based on the needs of their products. Honor has already demonstrated its foray into chip development with the introduction of its first self-developed radio frequency communication chip, the Honor C1, designed to enhance 5G signals. However, the brand acknowledges that more intricate system-on-chip designs will necessitate collaborations with established suppliers like Qualcomm and MediaTek.
Honor’s Journey and Market Position Established by Huawei in 2013, Honor swiftly gained popularity and recognition as one of China’s leading smartphone brands. The brand has expanded its presence to 20 international markets spanning Southeast Asia, Europe, the Middle East, and Latin America. In November 2020, Honor underwent a strategic ownership transfer when it was sold to a consortium led by the government of Shenzhen, its home city. This maneuver was undertaken to navigate the US trade sanctions that have adversely impacted Huawei’s operations.
Despite a 14% decline in total smartphone shipments in China due to an economic downturn, Honor impressively managed to increase its shipments by 30% last year, reaching a remarkable 52.2 million units. Consequently, its market share surged from 12% to 18%, trailing only behind Vivo, the sibling brand of Oppo.
Conclusion Honor’s establishment of a chip design subsidiary reflects its determination to solidify its position as a technological powerhouse in the highly competitive smartphone market. By emphasizing core software, graphics algorithms, communications, and photography, Honor aims to deliver cutting-edge innovations and set new industry benchmarks. As the company navigates the evolving dynamics of the smartphone landscape, it remains committed to adapting its chip strategy to best meet the requirements of its products. With its global presence and market growth, Honor’s pursuit of chip development signifies a crucial step in securing its long-term success.
