The recent shake-up within Honor, a smartphone brand, marks a significant shift in the company’s leadership and strategiesWith Huawei’s formidable return to the smartphone market, other brands, including Honor, are feeling the pressureAs Honor navigates a challenging period characterized by a declining market share, the company's decision to accelerate its capitalization efforts raises critical questions, particularly regarding the impact of leadership changes on its initial public offering (IPO) plans.

On January 17, Honor officially announced a leadership change that captured widespread attention across the internetZhao Ming, a key figure in the company, stepped down from his position as CEO after serving a decade with the brand, which is considered a remarkable tenure in such a fast-paced industryHe was succeeded by Li Jian, who brings extensive experience from various business fields to the table.

That evening, Zhao took to his personal Weibo account, expressing his emotions in a heartfelt post. “After four years leading the new Honor and ten years with the brand, I have hesitated for a long timeIt is with great regret that I announce a very difficult decision: I am saying goodbye to Honor,” Zhao wrote, hinting at the weight of the decision for both him and the company.

Zhao's resignation was not an isolated case; in the following days, rumors swirled about additional exits from Honor’s ranksReports suggested that Jiang Hairong, the Chief Marketing Officer for Honor’s China division, and Zheng Shubao, the head of sales in China, also departed from the company

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Such departures within a short timeframe signaled deeper turbulence within the upper echelons of Honor.

The management turmoil appears to be linked to the pressing challenges Honor faces as Huawei's solid comeback has constrained the market space for other smartphone manufacturersHonor's declining market share in China exacerbates the situation, prompting critical shifts in its strategic approach.

Honor is not merely dealing with managerial upheaval; the brand is also attempting to finalize its IPO plansJust recently, the company completed a shareholding reform, which sets the stage for a public listingAn industry leader like Li Jian, with his human resources and international experience, might offer a narrative that aligns better with the expectations of capital markets.

A Leadership Earthquake

The timing of Zhao’s departure was particularly striking, occurring just as the company accomplished its restructuring effortsOn the same day, Honor’s internal network revealed that Zhao stepped down due to health reasons, a rationale meticulously noted by the board.

Zhao’s exit created ripples throughout the marketWidely regarded as Honor's driving force, he joined Huawei in 1998, ultimately becoming a pivotal figure within Honor following its establishment as a subsidiaryAs Honor’s CEO, he acted as a bridge between its operational roots and its aspirations within the highly competitive smartphone sphere.

Since the spin-off from Huawei in late 2020, Zhao has been instrumental in repositioning Honor in the market, often engaging in fierce competition against rivals such as Xiaomi

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Yet, exiting at this crucial juncture raises questions about the company’s future trajectory.

Interestingly, the incoming CEO, Li Jian, shares a similar backgroundJoining Huawei in 2001, Li contributed significantly to the company’s overseas operations and sales strategiesHis previous successes, especially in expanding markets in Africa and Europe, make him a fitting candidate to guide Honor through its upcoming challenges.

Li's wealth of experience might prove essential as Honor continues to expand its reach beyond ChinaSince 2022, Honor's overseas sales channels have rapidly evolved, contributing over 50% of total sales by the end of 2024. Notably, during the Christmas period of that year, Honor reported a daily sales achievement of more than 150,000 units.

Amidst this leadership overhaul, further announcements about personnel changes followedOn January 20, the company released a notice indicating that Jiang Hairong, the Chief Marketing Executive, would resignWith a long history at Huawei and later Honor, Jiang's exit represents another shift in the company's marketing strategy.

The resounding changes within Honor’s management reflect growing pressures facing the companySince Huawei’s return, the competitive landscape has shifted dramatically, forcing Honor into a corner as it seeks to maintain its solid market presence.

Post-IPO, Honor’s journey reveals an upward trajectory, followed by a gradual decline

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Following Huawei's offloading of Honor near the end of 2020, the brand experienced significant turmoil initiallyZhao had previously noted the overwhelming challenges associated with reconstructing the operations and technology platform.

Despite these early struggles, the latter half of 2022 marked a revival for HonorThe company successfully reestablished its product momentum by focusing on mid-range offerings, particularly the digital series smartphones aimed at higher-end consumers.

According to data from IDC, Honor briefly led the Chinese smartphone market, achieving significant market shares in the processIn early 2024, it even ranked among the top three brands in the high-end segmentHowever, the revival came with challenges stemming from increased competition in the sector.

With Huawei's re-entry, the competitive landscape within China’s smartphone market has become increasingly crowdedThe latest figures from Canalys suggest a rebound in the overall smartphone shipments in China, but Huawei’s share of the increasingly stable market evidently comes at the expense of directly competing brands like Honor.

Honor’s fortunes fluctuated significantly over the subsequent quartersAlthough in Q1 of 2024, Honor maintained a substantial 17.1% market share, by Q2, the share dropped to 14.5%, causing a steep decline in its rankings within the industry.

As quarters progressed, a noticeable shrinkage in market share continued, accentuating the mounting pressures faced by Honor as it fought to regain its footing in the industry.

Looking ahead, challenges loom over Honor as forecasts project further gradual growth in the smartphone sector, establishing a competitive battleground for brands vying to capture a more significant portion of the market.

The Uncertainty Surrounding the IPO

With IPO preparations in full swing, the focus is acutely on the future of Honor

As of late 2023, the company announced plans for a public listing, culminating in a series of strategic moves in 2024.

China Mobile’s strategic investment in August 2024 signified confidence in Honor’s trajectory, leading the way for another restructuring cycle that will aid its public offering plans.

The company expanded its shareholder base with several new entries, which showcases its effort to solidify ties among critical sectors in the supply chain.

By the end of 2024, it was noted that Honor had amassed a diverse array of investors, including state-owned entities and major telecom operators, potentially providing them with a robust support network.

Honor has conveyed a steady growth in revenue and operational cash flow, underpinning the alignment with its diversified shareholder structure—a tactic intended to enhance collaboration among partners and foster innovation.

In early January 2025, word spread that Honor's dedication to restructuring was nearing fruition, officially transforming into “Honor Terminal Co., Ltd.” as a testament to its IPO aspirations.

In this pivotal moment, Zhao's unexpected departure casts a shadow over the anticipated IPO, underscoring the uncertainties that arise in the corporate world.

However, with Li Jian’s HR and international experience, the potential exists for Honor to navigate through this transition, enhancing the company’s positioning as it prepares for what must be its most significant next step.

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