The shuffle in Honor's management is far from over, with CEO Zhao Ming's departure merely the tip of the iceberg.

On January 17, Honor announced that Mr. Zhao Ming had resigned from his positions as company director and CEO due to personal reasons. The board of directors has appointed Mr. Li Jian to take over Zhao Ming's responsibilities.

Zhao Ming subsequently confirmed his departure from Honor on his personal social media platform.

Yet, the surprises didn't stop there. Just 72 hours after Zhao Ming's resignation, media reports emerged stating that Zheng Shubao, head of Honor's China sales department, and Jiang Hairong, former CMO of Honor's China region, would also step down. Coupled with the earlier departure of Wan Biao, vice chairman of Honor, it's evident that the company is undergoing a significant upheaval.

Industry insiders have analyzed the underlying causes: Firstly, the announcement of Zhao Ming's departure was swiftly followed by a series of executive resignations, indicating internal deliberations may have been hesitant or internal struggles intense. Secondly, with Honor planning to commence its IPO process, it's crucial that there are no significant adverse changes in its main business, directors, or senior management within the last three years, as per IPO requirements.

Given these circumstances, it's surprising that Honor's "soul figure," Zhao Ming, has departed amidst such uncertainty.

This raises questions: What exactly is going on at Honor? Is Zhao Ming's departure a result of dissatisfaction within the company?

Opinions vary regarding Zhao Ming's decade-long tenure at Honor. Some speculate it may be due to personnel rights conflicts with the board, while others believe it's to prepare for increased overseas market presence or related to internal shareholder listing interests. However, neither Honor nor Zhao Ming have provided any official responses, so we should refrain from speculating.

Nevertheless, based on Honor's current market performance, it's clear that "new leader" Li Jian will face significant pressure to grow revenue and meet shareholder demands.

After overcoming initial challenges post-independence, Honor emerged from supply chain restrictions in 2022 and targeted the high-end market. Its smartphone shipments in China reached a remarkable 52.2 million units, tying for first place with vivo and securing an 18% market share. This was Zhao Ming's finest hour and a testament to Honor's post-independence success.

Despite the global consumer electronics industry experiencing a challenging 2022, with Xiaomi, OPPO, and vivo shipments declining significantly (by 24% to 27%), Honor surged by 30%, standing out among domestic manufacturers. However, this good fortune was short-lived, with Honor's sales performance subsequently declining.

Canalys data shows that in 2023, Honor's smartphone shipments in the domestic market fell to 43.6 million units, with an annual growth rate of -17% and a market share of 16%. In 2024, shipments further declined to 42.2 million units, down 3% year-on-year, with a market share of 15%.

So, what accounted for Honor's initial success and subsequent decline?

There are several factors, but two points are crucial for Li Jian to address: First, the dissipation of Huawei's legacy dividends. Despite Ren Zhengfei's assertion that Honor and Huawei should have no lingering ties post-divorce, consumers still perceive Honor as Huawei's alternative. Zhao Ming brought Huawei's R&D team and management experience, allowing Honor to mimic Huawei's strategies in its early independence, capturing a significant share of Huawei's loyal users.

However, these dividends were temporary. With Huawei's triumphant return in September 2023, Honor's advantage as a Huawei alternative diminished. Consumer demand is limited; if they buy Huawei, they are unlikely to purchase Honor or OPPO in the short term.

Interestingly, according to Canalys statistics, after Honor's market share peaked in Q3 2023, it began to decline, falling out of the top five in Q4 2024 with a market share below 14%.

Second, Honor's early advantage in dealer channels is no longer evident. When Honor was acquired in 2020, it was jointly invested and established by Shenzhen Smart City Technology Development Group and over 30 Honor dealers, including national-level intelligent terminal sales giants like Tianyin Holding. This deep-rooted interest alignment allowed Honor to quickly rebuild its brand sales channels, with over 30,000 offline stores and counters just one year after independence.

However, this rapid expansion relied heavily on brand inventory and stockpiling, not fully converting into actual sales in a short time. As a result, when Honor's 2022 shipment data was released, many questioned its "high" shipment volume, likening it to a baijiu inventory dam, with inventory shifting from the brand supply chain to dealer channels.

Following this logic, Honor's current market performance downturn seems like a normal disenchantment, revealing the true picture after various bubbles dissipate.

Both dealer shareholders and financial shareholders are suffering. Honor's declining shipments indicate a lack of market recognition. If the brand continues to stockpile goods, dealers will face enormous financial pressure. Moreover, Honor's shrinking valuation is a painful issue, resulting in losses for both ends.

Media outlets have mentioned that the price at which Shenzhen's state-owned assets acquired Honor from Huawei may have been as high as RMB 260 billion. However, according to Honor's pre-IPO financing plan, the company plans to submit materials for a ChiNext board listing in 2024 with a pre-IPO valuation of RMB 200 billion. This represents a more than 20% valuation shrink, with investors losing nearly RMB 60 billion over four years.

If these data are true, it's understandable why Honor's shareholders and board of directors are disappointed with the old management team centered on Zhao Ming.

With this as a precedent, Li Jian and his team must further balance the interest demands of shareholder investors.

Some Honor shareholder dealers who split from Huawei have already begun "recovering" and self-rescuing by shifting stockpiling towards more expensive and profitable Huawei products, reducing their sales motivation for Honor.

Where will Huawei's warrior, Li Jian, lead Honor?

Regarding the current management changes, Honor's different shareholders have varying views. For major shareholders, letting Zhao Ming go may be a strategic move to find a better helmsman for Honor. However, for small and medium-sized employee shareholders who participated in Honor's internal employee stock ownership plan, this is somewhat unacceptable.

With Honor yet to go public and its most familiar veteran driver having stepped down, the new leader Li Jian now takes the helm. Even if Li Jian can bring Honor back on track, the future will undoubtedly experience a difficult period of development pain, including a major reshuffle in management, bringing uncertainties to Honor's IPO.

Nevertheless, what Honor's shareholders, both large and small, can now expect is only the newly appointed CEO Li Jian.

Li Jian is no stranger to success. Previously known as a Huawei warrior, he quickly completed market "pioneering" in Nigeria while stationed in Africa. In subsequent years, he held various positions at Huawei, including Special Assistant to the President of Sales and Service System and President of the Northeast Europe Region, gaining rich experience in overseas market management.

Moreover, in 2021, Li Jian joined the spun-off Honor, serving as a core member of the management team, vice chairman, director, and president of the Human Resources Department.

Li Jian's management ability is unquestionable. However, most of his previous successes were in the ToB field, and his operational abilities in the C-end fast-moving consumer goods market remain to be seen.

Some industry insiders speculate that Li Jian's current appointment is either a transitional measure or a sign that Honor plans to increase its efforts in the overseas market.

From a business perspective, Honor currently has two main strategic points: focusing on "AI and foldable screens" to target the high-end market, and expanding overseas. While integrating AI capabilities into mobile phones is a vision shared by major phone manufacturers, Honor faces intense competition and may struggle to create a significant gap. Foldable screens, while a high-end product, are too niche to drive significant revenue growth for Honor.

Therefore, in the short term, the only visible and cashable market for Honor is overseas expansion.

It's not surprising that Honor is eyeing the overseas market. When it was still part of Huawei, Huawei + Honor relied on technological and channel advantages to occupy a significant market share in Europe and the Middle East. Zhao Ming even boldly stated, "Rebuild Honor overseas."

However, due to factors like Huawei's chip sanctions, Honor shelved its overseas expansion plans. It wasn't until the second year after independence that Honor began re-entering overseas markets. In December 2024, the overseas market sales share of Honor phones reached 50% for the first time.

Objectively speaking, this achievement is impressive and offers significant future potential for investors. However, it's important to note that Honor's domestic and overseas market bases are still relatively small, and going overseas is essentially starting from scratch, which can easily amplify growth rates.

Even though the overseas market is growing rapidly, Honor's global market share has yet to enter the top five, still classified as a member of the "others." For Honor, which has been independent for over four years, finding new growth directions and bringing more confidence to shareholder investors is now paramount.