Huawei has confirmed it is to sell its mid- to low-end device unit, Honor, to a domestic consortium.
The sale has been widely expected as the Chinese vendor grapples with multiple US sanctions that have choked off its supply of high-end handset and networking chips.
The disposal distances the business from Huawei and gives it the chance to access US components, while also freeing Huawei from its lower-margin handset operation.
Announcing the transaction today, Huawei said it had been driven by agents and dealers.
"This move has been made by Honor's industry chain to ensure its own survival," it said.
Neither Huawei nor the new owner, Shenzhen Zhixin New Information Technology Co., has revealed the sale price.
Shenzhen Zhixin is jointly controlled by city government-owned Shenzhen Smart City Technology and more than 30 Honor agents and distributors, among them China Telecom and retailer Suning Tesco, business news site Jiemian reported.
Huawei has no stake in the new company, but several of its executives are moving across, including Wan Biao, COO of the consumer business, and current CEO Zhao Ming, who will retain his post.
The Honor brand was created in 2013 as a rival to Xiaomi and was later spun off into a dedicated business unit.
Huawei describes it as a "youth-focused smartphone brand" that has shipped more than 70 million units annually.
The vendor last year shipped a total of 240 million smartphones under the Huawei and Honor brands.
Mo Jia, an analyst at Canalys, said the sale meant that instead of fading away Honor now had a chance to flourish.
"There is not much Huawei could do with the sub-brand Honor," he said. "Spinning off Honor could be a better choice as it can grant the brand an opportunity to avoid the US ban and maintain its smartphone business."
Huawei is expected to continue to supply hardware and software services to Honor under license. It will keep selling its flagship Mate series phones and other consumer devices.
Mo said it was still unclear if Honor would have access to US components, although in a rare positive break for Huawei the US government two days ago gave Qualcomm permission to ship 4G chips to the Chinese firm.
The disposal points to Huawei leaning back to its roots as a B2B company, selling equipment and solutions to operators and enterprise, rather than as a consumer play.
It has also triggered speculation that Huawei will pivot strongly to its auto business, which is less vulnerable to US supply chain dominance.
— Robert Clark, contributing editor, special to Light Reading