Chinese smartphone brand Honor is reportedly receiving exceptional support from local government backers as it gears up for an initial public offering (IPO), according to policy documents and a source familiar with the situation. Honor has been granted research-and-development funding, tax exemptions, and assistance in expanding abroad, as revealed by three documents from the Shenzhen government. Additionally, the company is benefiting from a dedicated team at its local city hall implementing a 'no matter left overnight' policy.
This substantial support is expected to enhance Honor's attractiveness to investors as it prepares for its market debut, which could provide Shenzhen with a means to recoup its investment. Honor was valued at approximately 100 billion yuan ($13.8 billion) when it was acquired by a consortium of Shenzhen-owned entities from Huawei in 2020, as reported by Reuters. The company has not disclosed any specifics regarding its IPO, including its current valuation.
Honor is considering listing on China's A-share market, anticipating a higher valuation. The listing could occur either this year or early next year, according to sources who wished to remain anonymous as the plans are not yet finalized. Honor has stated that it has not received any extraordinary support from the Shenzhen government since January 1, 2021, and plans to commence shareholding reform in the fourth quarter, initiating the IPO process at an appropriate time.
The Shenzhen commerce department, tax bureau, and Futian district government have not commented on the matter. Honor surpassed Apple to become the third-largest handset vendor in China during the April-June period, while Apple fell to sixth place due to a decline in sales, according to Canalys data. The Chinese manufacturer aims to ship 100 million handsets annually by 2026 and become a top three global vendor by 2028, as outlined in one of the policy documents.
These ambitious goals are considered challenging given the soft demand in the world's largest smartphone market and fierce competition from numerous local handset makers, including former parent Huawei, according to analysts like Toby Zhang at Canalys. The official support underscores Honor's increasing significance to Shenzhen's economy, especially as the property sector's slowdown impacts local government finances. Honor ranks among Shenzhen's top six enterprises with industrial output exceeding 200 billion yuan, according to local government documents.
Shenzhen has pledged to provide special policy support for Honor in meetings between its leadership and local government departments. Authorities emphasized the importance of supporting Honor's development for stabilizing industrial growth, exports, and fostering the smart device industrial chain ecosystem. While Shenzhen typically supports major local firms, its support for Honor is notably exceptional, according to a policy insider who requested anonymity due to the sensitivity of the matter.
The city will offer Honor retroactive funding for research projects, a recent innovation that allows market mechanisms to determine research priorities. The local commerce department has also been tasked with establishing a special trade project for Honor to aid its expansion into smaller cities and overseas. One document indicates that Honor has received support in tax and customs assessments, saving it 600 million yuan annually in raw material costs and foreign exchange payments, resulting in a profit increase of around 300 million yuan.
Authorities in the central Futian district, where Honor is headquartered, have formed an Honor work team. This team has provided certification support, 500 housing units, and 150 million yuan in financial support, according to one document.
