Honor IPO advances, as new chief talks up its AI credentials

The former Huawei unit that became an independent smartphone brand in 2020 has taken an important step towards an IPO on China’s A-share market that could come next year

Key Takeaways:

• The Honor smartphone brand is advancing toward a 2026 IPO while repositioning itself as an AI company to attract investors
• Despite losing market share to rivals in China, the former Huawei unit is showing strong overseas growth in Europe and Asia

By Hugh Chen

Smartphone makers are increasingly looking to artificial intelligence (AI) to jumpstart growth by bringing new interactive functions to their increasingly mature products. Accordingly, many are trying to rebrand themselves as AI companies rather than traditional hardware manufacturers, a strategic shift that could help them generate new buzz and functionality around their models.

Such a narrative is a central strategy for China’s Honor Device Co. Ltd., which has spent much of this year positioning itself as evolving into a “globally leading AI device ecosystem company.” Such messaging has taken on added urgency as Honor chases a public listing, in which it hopes to showcase its AI credentials as a central attraction for potential investors.

The company’s IPO plans advanced significantly last week when it received regulatory approval to enter the “tutoring process” for a listing on China’s A-share markets in Shanghai and Shenzhen, which are mostly available to domestic investors. That tutoring process involves a comprehensive review for any prospective company wishing to list, during which its operations and financials undergo regulatory scrutiny. Companies can file a formal IPO prospectus only after completing the process.

An IPO would mark a successful end to a lengthy journey for Honor, whose listing has been the source of speculation since at least 2021 when reports suggested the company was considering a backdoor listing using a shell company. Similar rumors have surfaced repeatedly since then, gaining momentum late last year when Honor restructured as a joint-stock limited company, typically a prerequisite for going public.

A listing path for Honor, a former unit of embattled Huawei Technologies that is now an independent company, still has considerable ground to cover. According to the China Securities Regulatory Commission, the company is scheduled to complete its listing tutoring between January and March next year, with leading domestic brokerage Citic Securities acting as its tutoring broker. This timeline suggests Honor’s IPO could occur as early as the second quarter of 2026.

Struggles at home

Honor was established in 2013 as a value-oriented sub-brand for Huawei, whose own brand was focused on the premium end of the market, in hopes of someday taking on Apple’s iPhone. When major U.S. sanctions in late 2020 threatened Huawei’s ability to obtain smartphone chips and other U.S. technology, the parent spun off Honor to give the brand a better chance of survival by allowing it to maintain access to its American suppliers.

The consortium that purchased Honor was a hodgepodge of state-run entities and private investors, mostly from Huawei’s hometown in the southern boomtown of Shenzhen.

This strategy allowed Honor to avoid the same fate as Huawei’s smartphone business. Honor flourished in the years following the spinoff, partly by filling the market void left by Huawei as it retreated from the global market and was also forced to retreat at home. U.S. sanctions nearly crippled Huawei’s smartphone operations, and the company has only recently recovered after finding substitutes for components and other products it previously sourced from the U.S.

Honor’s post-spinoff performance was initially impressive. In 2022, it was the only smartphone brand among China’s top five to record shipment growth, posting a 34% increase and capturing 12% of the Chinese market to become the country’s second-largest brand, according to industry research firm IDC. The momentum continued into early 2024, when Honor claimed the top position with 17.1% of the Chinese market in the first quarter after achieving 13.2% sales growth.

However, Honor’s trajectory has since reversed. Its Chinese market share declined steadily through 2024, dropping from 14.5% in the second quarter to 13.7% in the fourth. By the first quarter of 2025, Honor had fallen out of the top five vendors in China, according to IDC. Counterpoint Research shows it ranked sixth for the period, with shipments down 12.8%.

Honor’s market struggles have coincided with strong growth from domestic rivals, particularly its former parent, as Huawei mounted its comeback. Huawei returned to the market in late 2023 with its Mate 60 series featuring domestically produced chipsets. During the first quarter of 2025, while Honor’s sales were falling, Huawei’s shipments surged 28.5% and Xiaomi’s (1810.HK) rose 16.5%, according to Counterpoint.

Despite domestic challenges, Honor has performed strongly overseas – a marketplace where Huawei hasn’t ventured due to its lack of access to Google’s Android system that is one of the two main smartphone operating systems used worldwide. The company achieved impressive growth in Europe in last year’s fourth quarter, with its shipments rising 77% year-over-year to become the market’s fourth biggest brand with 4% share.

International expansion represents a significant bright spot for Honor and could serve as an important draw for investors. Honor is also steadily gaining ground in Southeast Asia. While it has not yet broken into the region’s top five vendors, its growth trajectory has been remarkable, including 88% year-over-year growth in the first quarter of 2025 to a record 893,000 units shipped in the region, according to Canalys.

The temporary loss of market share in Honor’s home market is not necessarily cause for alarm, and the company could well recover with compelling new product launches. However, the Chinese smartphone market remains intensely competitive, and China represents Honor’s most critical market — one it cannot afford to cede to rivals.

To stand out from the crowd, Honor is trying to position itself as an AI-driven company. The company tried to highlight that strategy at the Mobile World Congress in Barcelona in March, announcing plans to invest $10 billion in AI over the next five years as part of its transformation from a smartphone manufacturer into an “AI device ecosystem company.”

The repositioning has involved substantial organizational changes. Among those, Honor has established a new AI industrial division and expanded its AI and software teams to 2,600 employees, according to local media reports.

Honor’s new CEO Li Jian, who took the helm in January, has told local media that smartphones represent a mature market where achieving the historical growth rates of 10% to 20% is no longer feasible. In contrast, he described AI phones as a “blue ocean market” where Honor’s years of accumulated expertise in AI algorithms and hardware development give it competitive advantages.

That said, AI is hardly Honor’s exclusive domain, but rather an industry-wide trend, with competitors like Xiaomi and Vivo pursuing similar strategies. Many analysts question whether the current crop of AI capabilities, which are limited, are compelling enough for consumers to consider upgrading their devices.

At the end of the day, repositioning itself as an AI company may enhance Honor’s profile, though investor interest will more likely hinge on the fundamentals of its smartphone business. While things don’t look great for the company in China, Honor’s expanding presence in overseas markets, particularly in Europe and Southeast Asia, could still prove attractive to potential investors.

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