A growing number of companies big and small believe they can beat China’s Xiaomi at its own budget-phone game, revving up competition and threatening profits in the largest smartphone market.
Established computer maker Lenovo in recent weeks began selling its first smartphone from its new Xiaomi-like spin-off called ZUK. Like Xiaomi, it will sell the high-end smartphone at a budget price of about $US280 ($400) through online sales, thereby cutting marketing costs.
ZUK’s chief executive, Chang Cheng, said he saw an opportunity to out-Xiaomi Xiaomi. “You can use someone else’s model to defeat them,” Mr Chang said.
In a hint of how quickly Lenovo has worked to develop a Xiaomi rival, Mr Chang said his team was still figuring out what the name ZUK stood for.
Five-year-old Xiaomi up-ended the world’s largest smartphone market by selling high-end phones at rock-bottom prices, in hopes that sales of services and merchandise, such as mobile games and headphones, would make up the difference. In return, it won a $US46 billion valuation from private investors and a place among the world’s largest start-ups. Now others are trying the same thing.
China’s largest, richest gadget companies — Lenovo, Huawei Technologies and ZTE — have launched Xiaomi rivals.
Among smaller companies, antivirus software maker Qihoo 360 Technology plans to sell phones under its new Qiku brand this month. Chinese YouTube-like video streaming website LeTV, which launched its new LeMax smartphone this year, plans to lose money on its hardware indefinitely, says smartphone chief Feng Xin. IHS iSuppli China Research head Kevin Wang said Chinese smartphone makers were adapting a business model usually used by internet start-ups such as Uber. “Burn cash to get users,” he said. “A lot of these smartphone players are probably going to die.”
The new rivals threaten a vast new industry in China where homegrown mobile-phone makers compete fiercely to make bigger, faster handsets. If the market ends up heavily divided, none of the competitors might end up with the market share to turn the business into a highly profitable one, analysts warn.
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