Text | New Knowledge in Science and Technology, author丨Siyuan, editor丨Fern Ying
After 4 years of solo career, Glory ushered in a critical moment!
Recently, Honor has launched a new round of financing, introducing investors including China Telecom, funds under CICC Capital, funds under Cornerstone Fund, Special Development Fund, and a new round of agent investment platform (Jinshi Xingyao). After receiving financing from China Mobile in August this year, Honor introduced a group of new shareholders this time.
Honor also stated that it plans to launch the corresponding shareholding reform in the fourth quarter of this year and launch the IPO process in due course. Relevant financial data will be disclosed in the corresponding process.
Although Honor has not disclosed the financing amount and valuation this time, the consensus in the industry is that Honor has taken another step towards shareholding reform and accelerated the pace of listing.
Frankly speaking, since Honor became independent, its determination to go further can be seen in terms of product layout, channel reform, or brand operation. After several years of hard work, Honor has experienced a difficult period in terms of shipments. It has bottomed out and is recovering, but as industry competition enters a fierce stage again, Honor will also face new hardships.
From Huawei’s “abandonment” to its return to the top
If you trace back the history of Honor, it was already 9 years ago. At that time, it was still a sub-brand operated by Huawei. It followed Xiaomi’s Internet mobile phone strategy and relied on Huawei as a big tree. Honor’s market share in China was once close to 17%.
However, in November 2020, Huawei was affected by many factors and decided to spin off Honor, and held a special farewell party. Ren Zhengfei also bluntly said, “Once ‘divorced’, we should not break the ties.” Cutting ties with Huawei, the glory after independence suddenly entered hard times.
From the perspective of market share, Honor once fell to 3% in April of the second year of its solo career, ushering in its “darkest moment.” Honor CEO Zhao Ming also said that Honor’s entire development platform and operating system are almost completely reinvented. Whether it is imaging capabilities, energy consumption management or operating systems, they all rely on the relatively stable platform that has been formed before. Therefore, when the platform changes At this time, basically the entire system needs to be reconstructed. “When the market and products are overthrown and restarted, it does not rise and fall, but returns to zero.”
Fortunately, Honor has found a new source of funds and is using a sea of machines tactics to occupy as much of the gap left by Huawei’s departure, even if the products it launches are almost criticized by the outside world as replicas of Huawei mobile phones. For example, the Honor digital series is very similar to the Huawei P series, while the flagship Magic series and Huawei Mate series are similar.
In this regard, Honor CEO Zhao Ming did not deny too much, but said that it will take some time to be better than the old.
It was not until the third quarter of 2021 that Honor turned the corner and achieved substantial growth. In the first quarter of 2022, data from market analysis agency IDC showed that Honor’s market share has exceeded 18.2%. The past two years have also been two years of rapid pursuit for Honor, and it even won the title of No. 1 in the domestic Android market in 2023.
In 2021, Honor returned to the top five in the market with shipments of 13.8 million units and a market share of 11.7%; shipments in 2022 increased by 34.4%. After 2023, Honor’s sales continue to maintain a high growth trend. Honor ranks first in the domestic Android market in terms of shipments in the fourth quarter of 2023 and the full year of 2023.
In 2024, with the recovery of the domestic smartphone market and the complete “return to life” of Huawei, Honor’s growth has begun to be weak and even declined, but it has still maintained its top five market position.
According to the latest data from market research agency Canalys, in the third quarter of 2024, Honor occupied the third place in the Chinese mobile phone market with shipments of 10.3 million units, with a market share of 15%, while vivo and Huawei accounted for 19% and 16% respectively. % market share is in the top two. Xiaomi and Apple, ranked fourth and fifth, are not much worse than Honor, with market shares of 15% and 14% respectively.
In order to completely solve the funding problem, Honor has been actively preparing for listing since its independence.
It is reported that as early as August 2021, a core dealer of Honor revealed that Honor may be listed in the near future. Dealers can purchase original shares with a subscription amount ranging from 5 million to 50 million yuan. However, according to China Business News, after the spring of 2022, Honor has withdrawn its original share subscription notice. In 2023, Honor once again restarted the channel allotment. At that time, industry insiders revealed that Honor’s allotment targets not only channels, but also employees, and even allocates the allotment indicators to various departments.
Among them, Honor’s shareholders are relatively dispersed, and the need to weigh the interests of all parties may be one of the reasons why it is “vacillating” about listing. Industry insiders said that many of Honor’s shareholders are its suppliers and have trading relationships with Honor. Honor still needs to further clarify the relationship and improve relevant structures and mechanisms before going public.
Up to now, Honor’s investors are relatively diverse, covering third-party capital, upstream and downstream ecological enterprises in the industry, operators, and agent platforms. The good thing is that at present, all investors have basically reached a consensus, and the listing is already “on the horizon”. However, today’s capital market has passed the “fanatical” stage. Whether Honor misses the listing window, or even breaks the stock immediately after listing, has become a matter of greater concern to shareholders.
Of course, regardless of whether it is listed or not, from a business perspective, Honor has indeed established a firm foothold and proven itself. However, from the perspective of the entire industry, it has also moved from an old battlefield to a new battlefield, and the road ahead is difficult to say. .
From survival to development
If Honor is divided into two stages after independence, then the first few years must be “survival”, and after 2023 it will be “seeking development.”
Some Honor dealers said that Honor’s product positioning in the early days of independence had many problems. In fact, at the R&D level, in addition to Honor’s existing teams, some R&D shared with Huawei, such as the Nova product line’s Beijing R&D team, have also been transferred to Honor; at the user level, “Pollen” (i.e. Huawei), which was previously operated by Honor, has also been transferred to Honor. , Honor fans) dismantled part of it and gave it to Huawei.
Honor even took away part of its raw material inventory, especially chip inventory. However, Zhao Ming also later explained that the actual chips that Honor brought out were very limited, and most of them were chips from original Honor models that were not used by Huawei phones. “After all, Huawei’s chip procurement and supply faced greater challenges. After we came out, , that is, to strive for free purchasing in the market.”
Therefore, early Honor products are often called Huawei “replicas”, and sales are mainly concentrated on low-end products. High-end products are not competitive enough, making it difficult to directly compete with competitors.
It can be understood that the opponent of Glory in the past few years has always been himself. “Being independent from Huawei, Honor has gone through a difficult period of ‘making whatever materials are available’. Only in 2022 has Honor resumed its due product rhythm.” Zhao Ming said frankly at the time.
However, when products can be shipped on a large scale, it also means that Honor needs to deliver results to shareholders. As early as after the split of Honor, a new company formed by a number of Shenzhen state-owned enterprises and more than 30 Honor dealers jointly acquired Honor, and most of them were originally Huawei’s offline channel dealers.
It is also because of the community of interests such as these dealers and the supply chain that they have also become an important driver of Honor’s early development. Not only are they actively allocating goods, but the outside world even once questioned the existence of “moisture” in Honor’s shipments, which is just from the “moisture” of the supply chain. The “left hand” is transferred to the dealer’s “right hand”.
“Nanfang Daily” once quoted industry insiders as saying that Honor’s shipments are likely to be transferred from the supply chain to the dealer system, because many of Honor’s dealers are Honor’s shareholders, and their own shareholders “build momentum” for their own companies, and inventory It has not really reached the hands of consumers.
Although Zhao Ming has repeatedly denied the inventory pressure, whether Honor mobile phones have really reached consumers’ pockets can only be a “mystery”. However, judging from some side reports, Honor’s early shipments are indeed a bit “odd”.
In January 2022, China Mobile purchased 1.5 million Honor 60 series models. Two months later, it purchased another 2 million Honor Magic 4 series phones. In just three months, Honor has made two large deals with China Mobile, with a total amount that may exceed 10 billion.
Judging from the financial reports of Honor’s distributors Tianyin Holdings and Aishide, in 2022, the two companies have already experienced a double increase in inventory and prepaid accounts.
No matter what, judging from the results, Glory has come back to life and has officially entered the stage of “bayonet fighting” with its peers.
But unfortunately, since 2023, as Huawei’s smartphone business has accelerated its return, Honor has been at war with Huawei in the high-end market, and has encountered resistance from Mi OV in the mid- to low-end market. The situation is not optimistic. One fact is that as Huawei Production capacity is gradually recovering, and the challenges facing Honor are indeed getting bigger and bigger.
In addition, against the background that peers are actively expanding their product lines, Honor has been unable to exert influence in diversification.
In contrast, both Huawei and Xiaomi have already formed diversified businesses. Taking Xiaomi as an example, its IoT and consumer products business and Internet services business can even compete with the smartphone business, and it is also regarded as the creator of the “second growth curve”. The car business has also become a hit, and it will ensure the delivery of 100,000 new cars in 2024.
Luo Guozhao, editor-in-chief of CHIP Technology, analyzed that from the perspective of Honor’s entire brand layout, Honor’s product line with high consumer awareness/roll-call rate is narrow and is still concentrated in mobile communication products such as smartphones. Although Honor also has PC product lines, smart home product lines and Internet of Vehicles products, it is still in the climbing period of brand value and scale, and the proportion of revenue generated for Honor is not high.
Even compared with OPPO and vivo, two rival companies that do not have particularly strong ecological capabilities, Honor has only been independent for three years and has a shorter product line production time. OPPO and vivo are more long-lasting consumer electronics in the minds of consumers, and are more easily accepted by dealers and audiences.
However, Zhao Ming believes that the mobile phone industry has not encountered a bottleneck. “Volume” means continuous innovation, and manufacturers should focus on AI-enabled hardware and hardware innovation. “From an objective point of view, the mobile phone industry was very volatile many years ago. However, when the market capacity remains at 270 million units and each company’s share is basically around 15%, the market will feel that the degree of volume is greater than before. higher.”
Fortunately, the mobile phone market has begun to pick up this year, and many “new variables” have appeared in the market. Honor’s IPO is being put on the table at this time, and it can also be seen that it is prepared to fight a tough battle.
Impacting the high-end requires new stories
At present, Honor has four main strategic points, namely AI, folding screen, high-end market and overseas market.
The first is AI. The industry generally believes that the integration of mobile phone end-side and AI large model capabilities will become everyone’s personal smart assistant in the future, and may even trigger a huge change in smartphones. For Honor, AI phones are a high ground that cannot be given up.
In fact, using AI to reconstruct the OS has been a direction that Honor has been planning since its independence. It was only when Magic OS 9.0, the AI operating system equipped with intelligent agents, was launched four years later that Honor’s AI OS layout truly took a substantial step.
“Honor’s real advantage is to use AI to reconstruct the entire service.” Zhao Ming said at the Honor Magic7 series launch conference that early product development was accustomed to solving problems with single-minded thinking and logic, and used the capabilities of the hardware itself. AI+ hardware gives the hardware a soul and has the ability to take initiative. To this end, he specially demonstrated the function of YOYO intelligent robot “ordering 2,000 cups of coffee in one sentence”.
However, developing AI and reconstructing operating systems is the path that almost every mobile phone manufacturer is currently taking. For example, the native HarmonyOS NEXT 5.0 released by Huawei not long ago also integrates native AI capabilities into the operating system.
It cannot be denied that AI phones have brought all smartphone manufacturers back to the same starting point. At this stage, Samsung, OPPO, Honor, vivo, Xiaomi, etc. are all developing AI phones. Meizu has even announced that it will stop the traditional “smartphone” project. OPPO It was also officially announced that it has officially entered the era of AI mobile phones.
Frankly speaking, AI mobile phones are indeed expected to start a new upward cycle in the mobile phone industry, but there are still errors and limitations in many aspects such as data security, natural language processing, and ecological application improvement, which also makes users generally not aware of AI mobile phones. In the future, as large AI models are applied on mobile phones, competition will become more intense. This test is the brand’s understanding of users. Which one can capture users will have the opportunity to stand out.
In fact, in recent years, folding screens have already become a new direction of “involution” for mobile phone manufacturers. Under constant competition, the entire folding screen market has gradually grown. At present, the market has initially formed a competitive pattern of “one pole and many strong players”. Huawei alone accounts for 40% of the market share, and Honor ranks second with more than 20% of the market share.
In fact, the folding screen can be said to be one of Honor’s “highlight battlefields”. Honor Magic V2 was released in July 2023. This product claims to have introduced folding screen products into the “millimeter level” era. In the secondary market that was shrouded in “fear of breaking the market” at that time, many users were even willing to increase the price to purchase it.
In the folding screen market, Honor does have a “princely appearance”, but the folding screen mobile phone market is still in a period full of variables. It takes time to go from niche to mass. This is an opportunity and a challenge for Honor, and it is bound to face more intense competition in the future. Competition requires greater breakthroughs in products, services, technology and other aspects.
One of the more contradictory points of Honor is the high-end market. Although the folding screen sells well, it is still a little weak in the entire high-end market.
Honor has been looking for high-end breakthroughs since last year, but the results are often unsatisfactory. At the end of last year, Honor announced a formal long-term strategic cooperation with Porsche Design, which is also seen as an important node in its high-end layout. Trying to leverage the momentum between brands to create high-end luxury products that highlight status, thereby completing a key step towards hitting the high-end market.
According to Honor, the sales of Honor Magic6 RSR Porsche Design Edition, the first cooperative mobile phone, were very hot during the first sale period, and all the first-sale futures were sold out within one day of sale. But it is worth mentioning that even now the official stock quantity of this mobile phone has not been announced. However, judging from the results, the sales volume of this mobile phone with a current market price of 20% off is only double digits on the e-commerce platform, and The sales volume of this product in the official store is only 100+ and it is out of stock, which is obviously illogical.
Glory’s genes destined that its road to high-end would not be smooth.
Prior to this, Honor had never tried to enter the high-end market, whether it was brand positioning or marketing strategy, and it had never accumulated a high-end user group. More importantly, Honor was forced to be separated from Huawei’s system and naturally could no longer enjoy the brand premium brought by Huawei.
In addition, self-developed chips are currently recognized as an important cornerstone for establishing a high-end position. Honor previously had the support of Kirin chips to widen the gap with its peers, but now, using Qualcomm chips that are homogeneous in the industry means that Honor It is necessary to make up for the optimization gap with peers first, and then find the highlights of differentiation before consumers can pay for it.
While Honor is rapidly advancing domestically, it is also accelerating the exploration and expansion of overseas markets. Zhao Ming has said on multiple occasions that 2022 is the first year of Honor’s overseas market expansion, and 2023 is the “first year of Europe.”
He also added that Honor has basically achieved profitable growth in its second year of overseas expansion. This year, its overseas market share accounts for about 30% of its own sales. Moreover, Honor will build Europe into its second home market and become a high-end brand in the European market.
At the International Consumer Electronics Show in Berlin in September, Honor released a cross-application open ecological intelligent agent called “AI Agent” and announced that it will be commercialized on the next-generation flagship model Honor Magic7 series.
Unlike some domestic manufacturers’ “going overseas at low prices” strategy, Honor insists on opening up overseas markets with high-end products and technological innovation, but this also means high-cost continuous investment.
A person in charge of a mobile phone brand in the European market previously said that in developed markets with higher brand barriers, there is no secret to the rise of a high-end brand. It is to continue to accumulate and invest. For consumers in the European market, short-term marketing is of little significance. It must be launched every quarter to make users feel that the brand is always there and is a trustworthy brand, so that they are likely to enter the store for consumption.
There are far more uncertainties overseas than at home, and it is still unknown how much share they can finally “take”. However, whether it is Honor or other domestic brands, they are relentlessly increasing their investment. This is a trend and a grab for the beach. It is also a rule of survival.
This year is the fourth year of glory’s independence. If in the past few years, glory was to rectify its name, then in the future, glory will use its own name to create a career. Going public has become a hurdle that it must pass now. It is a small thing to reorganize the equity relationship and return investors, but it is a big thing to raise funds to replenish bullets for future competition. As for how high Honor can fly under the new era of business and product narrative, we will wait and see.
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