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Exclusive-China’s Honor gets “unusually” strong state backing as it readies IPO

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By David Kirton

SHENZHEN, China (Reuters) -Chinese smartphone maker Honor is receiving an “unusually” high level of support from local government backers, as the former Huawei unit prepares an initial public offering (IPO), according to policy documents and a person close to the matter.

Honor is receiving research-and-development funding, tax breaks and support to expand overseas, three Shenzhen government documents showed. It is also benefiting from a dedicated team at its local city hall with a “no matter left overnight” policy.

The extra hand is likely to improve Honor’s investor appeal as it readies for a financial market debut which, if successful, could give Shenzhen city a way to exit its investment.

Honor was thought to be worth about 100 billion yuan ($13.8 billion) when a consortium under Shenzhen-owned entities bought it from Huawei in 2020, Reuters reported at the time. The handset maker has declined to disclose any IPO details such as how much it reckons it is worth now.

It is looking to list on China’s A-share market where it expects a higher valuation, said two of the people. It could list this year or early next, one of them said. The people declined to be identified as no plans have been finalised.

Honor said it has not received any Shenzhen government support beyond that ordinarily provided to firms since Jan. 1, 2021. It also said it would begin shareholding reform in the fourth quarter and initiate the IPO process at a suitable time.

Shenzhen’s commerce department, tax bureau and the Futian district government did not respond to requests for comment.

Honor replaced Apple (NASDAQ:) as the third-biggest handset vendor in China in April-June while a drop in sales left the U.S. smartphone pioneer in sixth place, Canalys data showed.

The Chinese manufacturer aims to ship 100 million handsets annually by 2026, a 75% jump from 2023, and to become a top three global vendor by 2028, one of the policy documents showed.

Those targets appear ambitious given soft demand in the world’s largest smartphone market and competition from a dizzying number of local handset makers including one-time parent Huawei, said analysts including Toby Zhu at Canalys.

BEYOND THE ORDINARY

The official support illustrates the growing importance of Honor to Shenzhen’s economy at a time when a slowdown in the property sector – a key source of tax revenue – has dragged on the finances of local governments nationwide.

The smartphone maker is among Shenzhen’s top-six enterprises with industrial output worth over 200 billion yuan ($27.6 billion), the local government documents showed without specifying a time frame.

Shenzhen city pledged to provide special policy support in meetings between its leadership and local government departments in October and March, the documents showed.

“Supporting Honor’s development is of great significance to our city for stabilising industrial growth, exports and for gathering the complete ecosystem of the smart device industrial chain,” authorities wrote following a March meeting.

“The city always wants to look after its major firms, but the way it has decided to champion Honor goes beyond the ordinary level of support”, said a person with knowledge of city policy, declining to be identified due to the sensitivity of the matter.

The city will provide Honor with retroactive funding for research projects – a relatively recent innovation which better allows market mechanisms to decide research priorities – the person said, citing government documents.

The local commerce department has also been called upon to establish a special trade project for Honor to help expand in smaller cities and overseas, the documents showed.

One of the documents showed Honor receiving support with tax and customs assessments, helping it save 600 million yuan in annual raw material costs and foreign exchange payments, leading to increased profit by around 300 million yuan.

© Reuters. A woman walks past an Honor sign at the handset maker's headquarters in Shenzhen, Guangdong province, China August 4, 2024. REUTERS/David Kirton

Authorities in the central Futian district, where Honor is headquartered, have established an Honor work team. The body has provided certification support, 500 housing unit and 150 million yuan of financial support, one of the documents showed.

($1 = 7.2484 renminbi)

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Palantir, Anduril join forces with tech groups to bid for Pentagon contracts, FT reports

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(Reuters) – Data analytics firm Palantir Technologies (NASDAQ:) and defense tech company Anduril Industries are in talks with about a dozen competitors to form a consortium that will jointly bid for U.S. government work, the Financial Times reported on Sunday.

The consortium, which could announce agreements with other tech groups as early as January, is expected to include SpaceX, OpenAI, autonomous shipbuilder Saronic and artificial intelligence data group Scale AI, the newspaper said, citing several people with knowledge of the matter.

“We are working together to provide a new generation of defence contractors,” a person involved in developing the group told the newspaper.

The consortium will bring together the heft of some of Silicon Valley’s most valuable companies and will leverage their products to provide a more efficient way of supplying the U.S. government with cutting-edge defence and weapons capabilities, the newspaper added.

Palantir, Anduril, OpenAI, Scale AI and Saronic did not immediately respond to a Reuters request for comment. SpaceX could not be immediately reached for a comment.

Reuters reported earlier this month that President-elect Donald Trump’s planned U.S. government efficiency drive involving Elon Musk could lead to more joint projects between big defense contractors and smaller tech firms in areas such as artificial intelligence, drones and uncrewed submarines.

Musk, who was named as a co-leader of a government efficiency initiative in the incoming government, has indicated that Pentagon spending and priorities will be a target of the efficiency push, spreading anxiety at defense heavyweights such as Boeing (NYSE:) , Northrop Grumman (NYSE:) , Lockheed Martin (NYSE:) and General Dynamics (NYSE:) .

Musk and many small defense tech firms have been aligned in criticizing legacy defense programs like Lockheed Martin’s F-35 fighter jet while calling for mass production of cheaper AI-powered drones, missiles and submarines.

Such views have given major defense contractors more incentive to partner with emerging defense technology players in these areas.

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Weakened Iran could pursue nuclear weapon, White House’s Sullivan says

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By Simon Lewis (JO:)

(Reuters) -The Biden administration is concerned that a weakened Iran could build a nuclear weapon, White House National Security Adviser Jake Sullivan said on Sunday, adding that he was briefing President-elect Donald Trump’s team on the risk.

Iran has suffered setbacks to its regional influence after Israel’s assaults on its allies, Palestinian Hamas and Lebanon’s Hezbollah, followed by the fall of Iran-aligned Syrian President Bashar al-Assad.

Israeli strikes on Iranian facilities, including missile factories and air defenses, have reduced Tehran’s conventional military capabilities, Sullivan told CNN.

“It’s no wonder there are voices (in Iran) saying, ‘Hey, maybe we need to go for a nuclear weapon right now … Maybe we have to revisit our nuclear doctrine’,” Sullivan said.

Iran says its nuclear program is peaceful, but it has expanded uranium enrichment since Trump, in his 2017-2021 presidential term, pulled out of a deal between Tehran and world powers that put restrictions on Iran’s nuclear activity in exchange for sanctions relief.

Sullivan said that there was a risk that Iran might abandon its promise not to build nuclear weapons.

“It’s a risk we are trying to be vigilant about now. It’s a risk that I’m personally briefing the incoming team on,” Sullivan said, adding that he had also consulted with U.S. ally Israel.

Trump, who takes office on Jan. 20, could return to his hardline Iran policy by stepping up sanctions on Iran’s oil industry.

© Reuters. FILE PHOTO: Iranian flag flies in front of the UN office building, housing IAEA headquarters, in Vienna, Austria, May 24, 2021. REUTERS/Lisi Niesner/File Photo

Sullivan said Trump would have an opportunity to pursue diplomacy with Tehran, given Iran’s “weakened state.”

“Maybe he can come around this time, with the situation Iran finds itself in, and actually deliver a nuclear deal that curbs Iran’s nuclear ambitions for the long term,” he said.

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Ukraine says Russian general deliberately targeted Reuters staff in August missile strike

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(Reuters) -Ukraine’s security service has named a Russian general it suspects of ordering a missile strike on a hotel in eastern Ukraine in August and said he acted “with the motive of deliberately killing employees of” Reuters.

The Security Service of Ukraine (SBU) said in a statement on Friday that Colonel General Alexei Kim, a deputy chief of Russia’s General Staff, approved the strike that killed Reuters safety adviser Ryan Evans and wounded two of the agency’s journalists on Aug. 24.

In a statement posted on Telegram messenger the SBU said it was notifying Kim in absentia that he was an official suspect in its investigation into the strike on the Sapphire Hotel in Kramatorsk, a step in Ukrainian criminal proceedings that can later lead to charges.

In a separate, 15-page notice of suspicion, in which the SBU set out findings from its investigation, the agency said that the decision to fire the missile was made “with the motive of deliberately killing employees of the international news agency Reuters who were engaged in journalistic activities in Ukraine”.

The document, which was published on the website of the General Prosecutor’s Office on Friday, said that Kim had received intelligence that Reuters staff were staying in Kramatorsk. It added that Kim would have been “fully aware that the individuals were civilians and not participating in the armed conflict”.

The Russian defence ministry did not respond to a request for comment on the SBU’s findings and has not replied to previous questions about the attack. The Kremlin also did not respond to a request for comment. Kim did not reply to messages sent by Reuters to his mobile telephone seeking comment about the SBU’s statement and whether the strike deliberately targeted Reuters staff.

The SBU did not provide evidence to support its claims, nor say why Russia targeted Reuters. In response to questions from the news agency, the security agency declined to provide further details, saying its criminal investigation was still under way and it was therefore not able to disclose such information.

Reuters has not independently confirmed any of the SBU’s claims.

Reuters said on Friday: “We note the news today from the Ukrainian security services regarding the missile attack on August 24, 2024, on the Sapphire Hotel in Kramatorsk, a civilian target more than 20 km from Russian-occupied territory.”

“The strike had devastating consequences, killing our safety adviser, Ryan Evans, and injuring members of our editorial team. We continue to seek more information about the attack. It is critically important for journalists to be able to report freely and safely,” the statement said.

Reuters declined to comment further on the allegation that its staff were deliberately targeted.

The SBU statement said Kim had been named a suspect under two articles of the Ukrainian criminal code: waging an aggressive war and violating the laws and customs of war.

“It was Kim who signed the directive and gave the combat order to fire on the hotel, where only civilians were staying,” it said.

Evans, a 38-year-old former British soldier who had worked as a safety adviser for Reuters since 2022, was killed instantly in the strike.

The SBU statement gave some details about how the strike had occurred, according to its investigation.

“To carry out the attack, the Russian colonel general involved one of his subordinate missile forces units,” the Ukrainian agency said, adding that the strike was carried out with an Iskander-M ballistic missile.

The SBU did not identify the specific unit.

© Reuters. FILE PHOTO: Reuters safety advisor Ryan Evans holds a cat during a news assignment, as Russia's attack on Ukraine continues, during intense shelling in Kramatorsk, Ukraine, December 26, 2022. REUTERS/Clodagh Kilcoyne/File Photo

Ivan Lyubysh-Kirdey, a videographer for the news agency who was in a room across the corridor, was seriously wounded. Kyiv-based text correspondent Dan Peleschuk was also injured.

The remaining three members of the Reuters team escaped with minor cuts and scratches.

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