Huawei refuses to work with incoming partner in China JV

Huawei appears to have scuppered Nokia's sale of its stake in their China-based joint venture, TD Tech.

The big Chinese vendor says it will not work with local firm New East New Materials, which has offered 2.1 billion Chinese yuan (US$305 million) for Nokia's 51% holding.

Shanghai-listed New East, which manufactures hi-tech inks, announced Sunday it was seeking to raise up to CNY2 billion ($209 million) to fund the deal.

But in a rapid reply on Sunday evening, Huawei – which owns 49% of TD Tech – ruled out any possibility of partnering with New East.

"Our company does not have any willingness or possibility to jointly operate TD Tech with New East New Materials," the statement said.

It said the TD Tech JV is based on the "strategic cooperation, technical strengths and global capabilities" of Nokia and Huawei.

Huawei said it understood Nokia's decision to dispose of its stake but for the partnership to continue "the purchaser must have the same strategic capabilities."

Figure 1: Huawei ruled out any possibility of partnering with New East.
(Source: Huawei)

Huawei said it was assessing all options, including the right of first refusal, the sale of its entire stake and the termination of technology transfer to TD Tech.

Privately held TD Tech offers everything from handsets to IoT solutions, claiming 5 million enterprise customers worldwide.

New East stock marked down

It doesn't disclose financial numbers but says 70% of its 2,000 staff are in R&D, which accounts for around a fifth of its revenue. Huawei's co-chairman Erics Xu Zhijun is one of three Huawei executives on the TD Tech board.

It may seem slightly odd that Huawei is happy to work with fierce global competitor Nokia but not with a local firm that is not a rival. But it clearly does not believe New East brings any expertise or technology to the partnership.

Investors received the message loud and clear. New East's stock dived 10% on Monday, although the company told one Chinese business newspaper that it was in active communication with all parties.

Huawei would not comment. Nokia China could not be reached for comment.

According to its website, New East's main business is the production of inks for flexible packaging, polyurethane adhesive and PCB electronic inks. It says Huawei is one of its customers.

In its latest quarterly report, it reported 2.7% higher revenue of 109 million yuan ($15.8 million) and earnings of 5.5 million yuan ($800 million). It has forecast full-year net income of between 15.8 million ($2.3 million) and 20.8 million yuan ($3.02 million).

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— Robert Clark, contributing editor, special to Light Reading