Huawei Technologies is selling budget brand smartphone unit Honor to a consortium of over 30 agents and dealers in a bid to keep it alive.
The deal comes after US restrictions on supplying Huawei Technologies on grounds the firm is a national security threat, which it denies.
The consortium issued a statement on Tuesday announcing the purchase, which will be made via a new company, Shenzhen Zhixin New Information Technology.
Huawei will not hold any shares in the new Honor company after the sale.
In Huawei’s statement, the company said its consumer business has been under “tremendous pressure” due to the “persistent unavailability of technical elements” for its phone business.
“This move has been made by Honor’s industry chain to ensure its own survival,” Huawei said.
The change of ownership will not impact Honor’s development direction, both statements said.
No figure for the deal was given.
Sources with knowledge of the matter say the US government restrictions have forced the world’s second-biggest smartphone maker – after South Korea’s Samsung Electronics Co Ltd – to focus on high-end handsets and corporate-oriented business.
One source said on Tuesday the US government will have no reason to apply sanctions to Honor after it separates from Huawei.
Honor sells smartphones through its own websites and third-party retailers in China, where it competes with Xiaomi Corp, Oppo and Vivo in the lower-priced handset market.
It also sells phones in Southeast Asia and Europe and ships 70 million units annual, according to the Huawei statement.
Electronics products and appliance store Suning.com is listed among the buyers, which include several state-owned investment firms in Huawei’s hometown of Shenzhen.
Honor will look for more investment partners in future, with the possibility of an eventual listing, the source said.