Where Will The Glory Of "Independence" Go?

In the past month, there have been rumors of Huawei selling glory. On November 10, 21st century economic reporter learned from a number of people close to glory that the sale of glory has been approved internally, and we are waiting for the final acquisition plan.

However, the valuation of the acquirer and glory is unclear. "Glory may not be sold to Huawei's competitors," a person familiar with the matter told 21st century economic reporter

As of press release, Huawei, glory and digital China have not responded. TCL, on the other hand, told the 21st century economic reporter, "I don't know at present."

At present, there are many details to be clarified about the split sale of glory. Photo by Gan Jun

Complex acquisitions

At present, there are many details to be clarified about the split sale of glory, which will be a complex process.

First of all, from the way of selling, the first layer, selling the glory brand, naturally has its brand value; the second layer, the production line and supply chain of mobile phones, which are tangible assets; the third layer, how to allocate talents, may be a more realistic part.

In the view of many industry insiders, if you only sell glory brand, its significance is not big, because this is not the core value of glory. Once tangible assets are involved, it means that glory should be independent of Huawei first. However, according to Huawei's management style, glory is not a completely independent product line at present. It is generated and developed around Huawei's ecology, including Huawei's application market, Huawei's complete services, and Huawei's R & D platform.

Therefore, the question is, if glory leaves Huawei, will it still be "glory"?

However, according to Jia Mo, an analyst at canalys, "glory without Huawei is not glory" is misreading by the outside world. Glory has long been separated from Huawei brands, and has been independent since 2018. "First of all, from the perspective of product language design, the appearance has been very independent of Huawei. Secondly, magic UI has long been independent of Huawei's emui, and has independent software optimization capability. Third, the components carried by mobile phones are not exactly the same as Huawei. Although glory is more or less dependent on Huawei, it has its own bargaining power in the supply chain. In addition to the independent ability in the upstream, glory also has some merit in the downstream channel ability of partial logic chain. Basically, the sales teams in China and overseas of glory are operating independently and building channels. "

For example, in the Russian market, glory once surpassed Samsung and ranked first. When the volume of shipments reached the highest level, it could reach three-quarters of Huawei's. glory operates independently in Russia, rather than tied with Huawei's sales team. "If glory is separated successfully, it will be successful if the two brands can play the benefit of 1 + 1 > 2. Glory may exist in a more flexible way outside the cage of entity list, and the new glory will attract more attention of competitors."

Win win split

Under the big framework of Huawei, splitting the glory for sale is equivalent to stripping off the branches of a big tree. There are also challenges in how to further develop. If the acquisition is completed, how the buyer will grasp the production and operation and maintain the core advantage of glory remains to be observed.

If glory is truly independent, it will also face the test of sales volume and profit, and the current valuation is still unclear. According to the data previously disclosed by Huawei, in the first half of 2019, the gross profit of consumer business was 66.063 billion yuan, accounting for 42.84%, and its gross profit rate was 30.24%. If the gross profit margin of consumer business is compared with Xiaomi and apple, the gross profit margin of Q2 millet in 2019 is 14%, while that of apple is higher than 35%. At that time, the gross profit margin of Huawei mobile phone was in the first echelon, and glory was also at the sales peak.

"In the first quarter of 2019, glory accounted for nearly 39% of Huawei's sales volume, but based on the current volume, glory only accounted for about 24% of the global sales of Huawei's mobile phone business in 2020, and the decline is obvious from the high point. In this way, the valuation will also have a certain range of changes," said Jia Mo Xiangji. "At the same time, we should also look at the virtual assets of glory, including brand value, talent value, etc 。”

According to canalys, in the third quarter of 2020, Huawei shipped 51.7 million smartphones, a year-on-year decline of 23%, and domestic sales accounted for about 2 / 3. In terms of global market share, Huawei still ranks second in the world with a share of 14.9%, second only to Samsung's 23%. This year, glory is facing a crackdown. There is competition from Nova brand inside, and there is also competition from Xiaomi OV and other brands outside. If glory is sold, whether it will open up a new world is also concerned.

Earlier, Guo Mingzhen, an analyst at Tianfeng securities, said in a report that Huawei's sale of glory mobile phone business was a win-win situation for glory brand, suppliers and China's electronics industry. "Once glory is separated from Huawei, the former will purchase unlimited parts, which will help glory mobile phone business and supplier growth; glory independence can maximize the brand and help China's electronic industry to develop independently and controllable; and it will have more advantages in the development ability and marketing of medium and high-end models."

Overall, in 2018, Huawei's consumer business surpassed the operator business for the first time and became the new revenue pillar of Huawei. Its plan is that Huawei's consumer business target will reach 150 billion US dollars in 2023 five years later, and glory will also play an important role. In the first three quarters of this year, Huawei achieved sales revenue of 671.3 billion yuan, a year-on-year increase of 9.9%, and a net profit margin of 8.0%. It is not easy to maintain growth. Huawei will continue to maintain the myth of high profits and high income of employees. There are still many tough battles to face.

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