Huawei Technologies has confirmed its plans to carve out its Intelligent Automotive Solution (IAS) business unit as a strategic maneuver to bolster innovation and navigate financial challenges. The new venture to establish a smart car software and components firm is set to attain a substantial valuation of up to 250 billion yuan ($34.67 billion), with Changan Auto and other investors securing stakes.
The spin-off involves Huawei’s four-year-old IAS business unit, originally conceived to be the equivalent of Germany’s Bosch in the intelligent electric vehicle (EV) era. The new entity will inherit the unit’s core technologies and resources with an ambitious valuation in mind, according to Reuters.
Changan Auto, Huawei’s primary automotive partner, is set to hold up to 40%, with the ultimate parent company, the state-owned China Ordnance Equipment Group, also considering a significant investment. State-owned automakers FAW Group and Dongfeng Motor Group are in advanced discussions with Huawei for up to 5% ownership each.
Despite these uncertainties, Huawei sees this strategic shift as a catalyst for innovation in smart car technology and an impetus for the broader automotive industry.
The move comes on the heels of challenges in growing its smart car business, necessitating capital recoupment to offset extensive research and development (R&D) spending. The IAS unit reported a loss in the first half of 2023, contributing only one billion yuan to Huawei’s total revenue of 310.9 billion yuan.
In an unconventional move, Huawei is contemplating relocating the new firm’s headquarters to Chongqing in collaboration with Changan Auto. The spin-off is anticipated to facilitate the company’s planned listing, according to insiders.
In addition to its smart car endeavors, Huawei has also inked a global cross-licensing agreement with Sharp, covering essential patents for cellular standards, including 5G and 4G communications. Looking forward, the company anticipates the introduction of its P70 flagship series in 2024, projecting robust demand and estimating sales to triple compared to its predecessor.
