Some of the company's other phones are even cheaper and have helped the company quickly grow its market share in China. To keep its operation costs down, Xiaomi has ditched traditional advertising and brick-and-mortar stores, for an approach that focuses on selling and marketing its phones through the Internet.
Raising product prices, however, would dilute the brand, given that Xiaomi is known for offering low-cost phones, Tay said. "Also, India is a key market for Xiaomi and this dispute may enable the local vendors in India to gain some ground," she added.
It doesn't help that Xiaomi has also been accused of lifting ideas from competitors, including Apple, which might expose the company to more patent litigation.
On Tuesday, the Chinese company unveiled a new air purifier product, but soon after a Japanese firm alleged that Xiaomi had copied its own designs. The Japanese firm, called Balmuda, is considering taking legal action.
Xiaomi, however, still has certain factors playing in its favor. The company has been able to raise large amounts of funding from investors, and it still has plenty of room to grow in its home market of China, said CK Lu, an analyst with research firm Gartner.
"Even though they have some issues, the Chinese market is big enough to support a company like Xiaomi, and they can expand to other product lines," he said. To defend itself from lawsuits, Xiaomi could end up acquiring a technology company with a strong patent portfolio, he added.
Sign up for CIO Asia eNewsletters.