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As the "helmsman" of domestic smartphone manufacturer Honor Device Co., Ltd. (hereinafter referred to as "Honor"), Zhao Ming has more than 3 million followers on Weibo.

In January this year, Zhao Ming released an in-depth interview program "Zhao Ming x Dou Wentao Dialogue" on Weibo. In the video, facing the question of the well-known host Dou Wentao on the topic of Honor's listing, Zhao Ming did not avoid it, but directly expressed his point of view: "In fact, from the perspective of the enterprise, because listing is a financing (behavior), it is a process of realizing one's efforts."

Different from Huawei, OPPO, vivo and other mobile phone manufacturers, Honor has repeatedly emphasized in public through senior management that going public is its established strategic direction since it "parted ways" with Huawei.

Recently, an unofficial Honor Pre-IPO financing plan circulated in the market showed that HonorThis round of valuation is 200 billion yuan.It plans to submit materials for listing on the Growth Enterprise Market in 2024. According to relevant media reports citing people familiar with the matter, Honor is expected to be listed on the A-share market this year or early next year, and has received "extraordinary strong support" from the Shenzhen Municipal Government.

In response to this, Honor responded to the reporter of the International Financial News, saying, "Honor plans to launch the corresponding shareholding reform in the fourth quarter of this year, and will start the IPO process in due course. The company will disclose relevant financial data in the corresponding process. From January 1, 2021 to the present, Honor has not received support from the Shenzhen Municipal Government beyond that of ordinary enterprises."

As a sub-brand launched by Huawei in 2013, Honor has been operating independently from the Huawei system since November 2020, and it has been more than three years. During this period, Honor's listing process has always attracted much attention from the industry, and speculation about its backdoor listing has emerged in the market. However, Honor has publicly clarified the relevant rumors many times, until November 2023, when the company announced that it would enter the capital market through an IPO.

Among the current domestic smartphone manufacturers, only Xiaomi Group is listed on the Hong Kong Stock Exchange and Transsion Holdings is listed on the A-share market. As Honor's IPO pace accelerates, the market is generally concerned about whether it can become another domestic smartphone manufacturer that successfully enters the capital market.

Honor mobile phone store, photo taken by Ma Yunfei

"Going public is undoubtedly an important option in Honor's future plans." In June 2021, less than a year after Honor and Huawei officially "parted ways", Zhao Ming elaborated on this point in a public occasion.

Back in November 2020, Huawei made a major decision to divest its Honor business assets as a whole. Several Shenzhen state-owned enterprises joined hands with more than 30 Honor dealers to jointly establish Shenzhen Zhixinxin Information Technology Co., Ltd. (hereinafter referred to as "Shenzhen Zhixinxin"), which became a new platform for operating Honor. The actual controller behind it is the Shenzhen State-owned Assets Supervision and Administration Commission. Caixin once wrote in an article that from the perspective of channel dealers, joining state-owned assets to take over Honor was also an "involuntary" decision. The report quoted a channel dealer involved in the acquisition as saying, "All our business is with Huawei and Honor. If there is no acquisition, I don’t know how to do business next year."

At that time, industrial and commercial data showed that Shenzhen Zhixinxin, which was established on September 27, 2020, was chaired by Wan Biao, Chief Operating Officer of Huawei's Consumer Business, Zhao Ming, President of Honor, as General Manager, and Huawei's consumer business executives Peng Qiuen and Fang Fei were all directors.

It is worth noting that after the Shenzhen State-owned Assets Supervision and Administration Commission took over Honor, it did not rush to promote Honor's share reform for two years. Until November 2022, Honor added six new shareholders, including panel leader BOE and Shenzhen state-owned capital system Guosen Capital, through a private placement. After this round of financing, Honor's shareholders increased to 15, but the Shenzhen State-owned Assets Supervision and Administration Commission is still Honor's absolute controlling shareholder.

Rumors of Honor's listing resurfaced. Finally, on November 22, 2023, Honor's internal board of directors issued an official announcement, which not only announced the new appointment of Wu Hui, the former chairman of Shenzhen Water Group Co., Ltd., as the company's director and chairman, and the adjustment of the former chairman Wan Biao's role as vice chairman, but also clearly pointed out that Honor will officially enter the capital market through an IPO.

This is the first time that Honor has clearly outlined its blueprint for going public three years after its independence from Huawei. In the document, Honor's board of directors stated that in order to achieve the company's next stage of strategic development, it will continue to optimize its equity structure, attract diversified capital, and promote the company's entry into the capital market through its initial public offering. As the company's plan to move toward the public market is gradually implemented, the board of directors will be adjusted in accordance with the standards of listed companies, and the board members will gradually be diversified to adapt to the governance and regulatory needs in the new development stage.

"This is to improve the structure and operation in accordance with the corresponding listed company (requirements). The joining of Wu Hui will make the board of directors more diversified. We all come from business backgrounds. In the future, experts from various industries will join the Honor board of directors. This is a comprehensive consideration." On November 23, 2023, Zhao Ming said in an interview with the media that backdoor listing has never been an option for Honor. Honor's IPO has no benchmark and it will definitely choose to go public in China in the future.

Regarding Honor's latest response that it plans to launch the corresponding shareholding reform in the fourth quarter of this year and start the IPO process in due course, Shen Meng, director of Xiangsong Capital, told the reporter of the International Financial News that shareholding reform is to transform a limited liability company into a joint stock company, which is one of the basic conditions for becoming a listed company. "Shareholding reform requires verification of assets and liabilities, and distribution to original shareholders at a par value of one yuan per share, so most of the time is spent on the stage of verifying assets and liabilities. If we only consider the basic conditions for Honor's listing, then the reform will be sufficient, but in actual operation, more complex factors such as policies and valuations must be considered."

From repeated market rumors that Honor will "go public through a backdoor listing" to now officially confirming that it will embark on the IPO road, this series of twists and turns and changes also reveals Honor's cautious attitude towards the listing decision.

Regarding Honor's listing, it is widely rumored that Honor's Pre-IPO valuation has reached 200 billion yuan. However, many industry insiders told reporters that in the current capital market environment, it is not easy for a pure mobile phone business to tell a 200 billion yuan capital story. After all, since 2016, the smartphone market has shown varying degrees of saturation worldwide, and manufacturers are forced to fight fiercely in the limited stock market, and their profit margins are constantly compressed.

Despite the recent positive signs of recovery in the mobile phone market, the industry still faces severe challenges. TechInsights' latest report reveals a situation that cannot be ignored: the replacement cycle of global smartphone users has been extended to an unprecedented 51 months in 2023, showing a general decline in consumers' willingness to replace their phones. In the Chinese market, although smartphone shipments achieved a slight year-on-year growth (1%) in the first quarter of 2024, this was mainly due to the low base effect of the same period last year, and the actual market demand recovery was still weak.

Regarding the trend of the mobile phone industry in the second half of the year, IDC (International Data Corporation) China Research Manager Guo Tianxiang previously revealed to reporters that according to the forecast data for the first quarter of 2024, smartphone shipments in the Chinese market in the second half of the year are expected to be basically the same as the same period last year, with a year-on-year growth rate of only 0.1%.

Currently, Honor's products include smartphones, tablets,Smart Home, smart wearable devices and other mobile terminals, but the core business is still dominated by smartphones. In January this year, IDC disclosed the latest tracking report on the domestic smartphone market. The report shows that in 2023, China's smartphone market shipments will be about 271 million units, a year-on-year decrease of 5%, the lowest shipments in nearly a decade. The top five manufacturers in China's mobile phone market shipments are Apple, Honor, OPPO, vivo and Xiaomi, with market shares of 17.3%, 17.1%, 16.7%, 16.5% and 13.2%, respectively. However, the year-on-year growth rate of the market share of these five manufacturers is negative.

If we focus on the most recent quarter, IDC data shows that in the second quarter of 2024, China's smartphone market shipments will be about 71.58 million units, a year-on-year increase of 8.9%. Honor ranks fourth in the Chinese market with a market share of 14.5%, and its market share has fallen by 3.7% year-on-year.

Recently, a media outlet quoted a document saying that Honor aims to ship 100 million mobile phones per year by 2026 and become one of the top three mobile phone suppliers in the world by 2028. Although this statement has not been officially confirmed, from a strategic perspective, in addition to rushing into the high-end market, Honor is also strengthening its overseas strategy and vigorously deploying overseas business to seek growth in shipments.

Zhao Ming once revealed that Honor's overseas sales are expected to grow by 130% to 140% year-on-year in 2023, much higher than the previously expected growth rate of 70% to 80%, and the overseas business is expected to achieve profitability. In February this year, Honor officially launched a new AI-enabled full-scenario strategy in Barcelona, ​​launching platform-level AI empowerment, a human-centric cross-operating system experience, and a new human-computer interaction based on intent recognition. At the MWC World Mobile Communications Conference, Honor showcased terminal products such as the Magic6 series, Magic V2 series, and Honor MagicBook Pro16.

However, conquering overseas is undoubtedly a difficult road. According to data from market research firm Canalys, the total global smartphone shipments in 2023 will be 1.14 billion units, a decline narrowed to 4% from 2022. Among them, Apple ranked first in the year for the first time with a 20% market share and 229.1 million units shipped. Samsung followed closely behind, shipping 225.5 million units for the whole year, with a market share of 20%. Xiaomi consolidated its third position and maintained a 13% market share, with shipments of 146.1 million units. OPPO and Transsion ranked fourth and fifth, with market shares of 9% and 8%, respectively. Because Honor did not rank among the top five, the relevant shipments were not disclosed in detail.