Will Honor finally IPO? Can Honor surpass Huawei through going public?

08/19 2024 446

When it comes to Honor smartphones, almost everyone knows that it was once Huawei's beloved child. When Honor separated from Huawei and became independent, Ren Zhengfei wrote a deeply touching letter. However, after years of independent operation, Honor has achieved remarkable results, consistently ranking among the top sellers in China's mobile phone market. Recently, news of Honor's impending IPO surfaced, and Honor has responded, leading one to wonder if Honor can surpass Huawei through going public. Where should Honor's future head?

I. Will Honor Finally IPO?

According to reports from China Business Network and Reuters, Honor plans to go public this year or early next year, potentially receiving exceptional support from the Shenzhen Municipal Government. Two insiders said that the company is seeking to list on China's A-share market, expecting a higher valuation, and that it may go public this year or early next. A policy document shows that the Chinese manufacturer aims to ship 100 million phones annually by 2026, a 75% increase from 2023, and to become one of the world's top three mobile phone suppliers by 2028.

According to Securities Times and Caijing, Honor responded to rumors of its IPO, stating that it adheres to the principle of open and transparent development and will continue to diversify its shareholding structure. Honor plans to initiate shareholding reforms in the fourth quarter of this year and subsequently launch the IPO process at an appropriate time, disclosing relevant financial data during the process. Honor clarifies that it has not received any exceptional support from the Shenzhen Municipal Government since January 1, 2021.

Earlier, The Paper reported that on November 23 last year, Honor CEO Zhao Ming stated in an interview that backdoor listings were never an option for Honor. Both its brand, R&D, and finances adhere to the strictest standards. An IPO requires a more transparent presentation to consumers and the public, and Honor has the confidence to offer unique value. Zhao Ming also said that Honor's IPO has no comparable benchmark but will definitely choose to list in China.

At that time, Honor also welcomed a simultaneous "change of leadership." Wu Hui, with strong financing experience and a background in the Shenzhen State-owned Assets Supervision and Administration Commission, became the company's director and chairman. This move was interpreted by the industry as accelerating Honor's IPO process. Judging from Wu Hui and Honor's latest statements, its IPO is progressing normally, and the listing path and location remain unchanged, reflecting Honor's determination to go public.

According to market analysis firm TechInsights, global smartphone shipments rebounded 7.6% year-on-year in the second quarter of 2024, reaching approximately 290 million units. Samsung led the global smartphone market with nearly 19% market share. Apple ranked second with 15% market share, followed by Xiaomi, vivo, and Transsion in the top five, then OPPO (including OnePlus), Honor, Lenovo-Motorola, realme, and Huawei.

II. Can Honor Surpass Huawei through Going Public?

News of Honor's IPO plan is not surprising. It marks the maturity of Honor as an independent entity and reflects the increasingly fierce competition in China's smartphone market. How should we analyze and view Honor's IPO journey?

First, Honor's IPO is only a matter of timing. After separating from Huawei, rumors of Honor's IPO never ceased. As a leading player in the mobile phone market, Honor's listing is virtually inevitable.

After independence, Honor continuously expanded its market share and enhanced its brand influence, investing heavily in technology research and development, product line layout, and marketing, achieving remarkable results. Now is the right time for shareholding reforms and listing, providing Honor with more financial support, further propelling its development and enhancing its brand recognition and market influence.

Taking Xiaomi as an example, its early listing provided strong financial backing for rapid expansion and technological innovation. After growing and accumulating experience as an independent entity, Honor now has the foundation for an IPO. Moreover, with intensifying market competition, companies need more resources to tackle challenges, and listing is an effective approach.

Second, Honor's choice to go public is an inevitable outcome of fierce market competition. China's mobile phone market is in a fiercely competitive stage. Companies are investing heavily in R&D and launching more competitive products and services, competing based on capital strength and comprehensive capabilities. While Huawei, vivo, OPPO, and Xiaomi have solid foundations, Honor, despite rapid growth, still faces financial and resource pressures. Listing is thus an inevitable choice for Honor's long-term sustainable development, providing more financial support, enhancing brand influence and market competitiveness, and laying a solid foundation for future technological innovation and market expansion.

Listing can bring Honor multiple benefits. It can broaden financing channels, providing ample funds for R&D, production, and marketing. Listing also improves corporate governance and transparency, attracting talented individuals and partners. Moreover, it's an excellent branding opportunity. With Honor's current popularity, a full-scale IPO would garner headlines, boosting its brand image.

Honor's listing is an inevitable choice amidst fierce market competition. For an emerging company with less solid foundations than competitors, listing is crucial for seizing opportunities, consolidating its market position, and preparing for future competitions.

Third, the question for Honor's IPO is where to list. Currently, the difficulty of Honor's listing is not significant. Amidst fierce competition and potential losses, Honor is more likely to list on the Hong Kong Stock Exchange, ChiNext, or STAR Market, which are more tolerant of losses.

The Hong Kong Stock Exchange is international and friendly to emerging and tech companies, offering a relaxed financing environment. Many mainland tech companies have achieved success there, such as Tencent and Alibaba. ChiNext and STAR Market focus on supporting tech-innovative enterprises, aligning with Honor's positioning. Moreover, domestic capital markets have a deeper understanding of local enterprises, attracting enthusiastic investors. These platforms offer high market activity, liquidity, a relaxed regulatory environment, and a broad investor base. Since Honor has ruled out backdoor listings, these more loss-tolerant markets are preferred, especially given the company's intention to list in China.

Fourth, what's Honor's real challenge? If listing poses no significant barriers, what's Honor's true challenge? For Honor, listing is not an endpoint but a new starting point. The biggest challenge lies in standing out amidst fierce competition, including with its former parent, Huawei.

Today's capital markets prioritize actual performance and profitability over flashy stories. Honor must prove its worth with tangible profits and revenues, which is challenging against Huawei's technological, brand, and market advantages. Competing with Huawei in the high-end market requires significant efforts in technological innovation, product quality, and brand image. Additionally, international brands like Apple and Samsung, along with domestic rivals like vivo, OPPO, and Xiaomi, pose significant pressure on Honor.

Fifth, where does Honor's long-term pursuit lie? In the long run, though Honor has a solid foundation, surpassing competitors like Huawei will be a long journey.

In technological research and development, Honor needs to increase investments and launch innovative technologies and products. In branding, it must clarify its position and enhance its image and value through sponsorships and cultural activities. In market expansion, Honor should consolidate its domestic market share while actively exploring international markets, tailoring marketing strategies to local needs.

In conclusion, Honor's IPO is a significant milestone, but challenges lie ahead. Only through continuous innovation and self-improvement can Honor achieve long-term stability amidst fierce competition. The market is a marathon where no one can slack off, and Honor is no exception.

Quote of the Day: "When down on your luck, don't talk about principles; survival is key. In adversity, sentimentality is irrelevant; pragmatism is fundamental. Everyone's confidence stems from financial strength. Money heals all inferiority complexes and suffering. Kindness alone is insufficient; you must excel. — Kazuo Inamori

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