Xiaomi shifts into low end of mobile sector

The company officially offers the first batch of products on Aug 12

Chinese smartphone manufacturer Xiaomi Corp launched a sub-brand "Hongmi" (red rice) on Wednesday that targets the country's entry-level smartphone buyers.

With rumors circulating that Apple Inc will introduce cheaper iPhones for Chinese clients in the second half, Beijing-based Xiaomi aims to beat its rival to the punch in the lower-end market.

Xiaomi released the Hongmi smartphone, priced at 799 yuan ($130), at a Beijing news briefing on Wednesday.

Hongmi has a 4.7-inch screen, Android-based device equipped with MediaTek Inc's 1.5-gigahertz quad-core processor. The dual-card handset supports China Mobile Ltd's second-generation (2G) and third-generation (3G) networks.

Lei Jun, founder and chief executive officer of Xiaomi, said the launch of the Hongmi signifies Xiaomi's first attempt to explore the nation's affordable (below 1,000 yuan) smartphone market.

"I believe the Hongmi is the best product among all 1,000-yuan smartphones" in China, Lei said. "Xiaomi does not care much about sales or shipments, but we strive to produce the finest devices" for our costomers, Lei said at the event.

Since Apple is hatching a plan to slash its iPhone price and garner more Chinese buyers, some Xiaomi officials said the "birth" of Hongmi is a preparation for the looming price-cut trend.

"People will pay more attention to cheaper but capable smartphones," one said.

Apple's Chief Executive Officer Tim Cook was in Beijing again, said officials at China Mobile Ltd on Wednesday.

Xi Guohua, China Mobile's chairman, met with Cook on Tuesday to discussion cooperation, said Li Jun, spokesman of China Mobile, via a text message.

Analysts said Cook might have come to China to discuss Apple's shrinking sales.

There's no doubt that Hongmi will open more doors for Xiaomi. Compared with the middle and high ends of the smartphone market, where Xiaomi has been operating, the entry-level market boasts many more potential buyers.

According to data from Alibaba Group Holding Ltd, China's biggest e-commerce company by sales, 61 percent of the mobile phones sold on the Taobao marketplace and the business-to-customer platform Tmall.com were priced below 1,000 yuan. About one-fifth of the mobile phones sold cost 1,000 yuan to 2,000 yuan, while only 18 percent cost more than 2,000 yuan.

"The entry-level smartphone market is definitely the market offering the most consumers," said Li Yanyan, an analyst with Beijing-based research firm Analysys International.

Domestic telecom operators have actively promoted and launched market campaigns for affordable smartphones, which help raise consumer awareness, she pointed out.

Sandy Shen, an analyst with Gartner China, said the launch of the Hongmi also fills a void for Xiaomi in cooperation with the nation's biggest mobile operator, China Mobile.

"Previously, Xiaomi partnered with both China Unicom and China Telecom, but we never heard any information about cooperation with China Mobile," Shen said.

China Mobile, although struggling in the domestic 3G competition because it adopted a relatively inferior 3G technology, has gradually got on track to catch up with rivals in recent months.

China Mobile sold more than 59 million mobile phones for its 3G network in the first half of this year, said Ma Jingxin, vice general manager of China Mobile Terminal Co, during the same event. Ma added the figure was close to China Unicom's 3G mobile phone shipments.

The Hongmi smartphone is available for pre-orders on Tencent Holdings Ltd's Qzone, a social-networking platform with more than 60 million users. On Aug 12, Xiaomi will officially offers the first batch of products.

Although Chinese media have reported that Tencent was about to invest in Xiaomi, officials at Xiaomi have denied any such plan.

"Qzone is China's biggest social-networking website and it closely aligns with Xiaomi's targeted clients," Li Wanqiang, vice-president of Xiaomi, said.

"Social-networking platforms are the major battlefield (for Xiaomi marketing and selling its products)," Li added.

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