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The rise of China's smartphone makers

Matt Hamblen | Jan. 2, 2015
10 of the top 17 smartphone manufacturers now come from China.

Can you say 'She-ow me'?
The third-largest smartphone maker, Xiaomi (pronounced she-ow me), was founded in 2010 by a group of tech-savvy entrepreneurs that included Jun Lei, the company's chairman and CEO, and Bin Lin, its president. Xiaomi's global division is headed by Hugo Barra, who joined in 2013 after working as president of Android product management at Google.

Its first smartphone, an Android device called the Xiaomi Mi1, was announced in 2011.  Since then, the company has produced several smartphones and a tablet, the MiPad, announced in 2014.

The private company had $5.5 billion in revenues for the first six months of 2014. Xiaomi is the Mandarin Chinese word for "millet," or literally "little" (Xiao) "rice" (mi). But the name also links "Xiao" to "mi," the latter possibly short for "mobile Internet" or even "mission impossible," according to comments attributed to Jun, the CEO. He also has connected "Xiao" to a Buddhist belief that a single grain of rice is as great as a mountain.

A long-term threat?
Are these Chinese companies a threat to the established phone makers? They probably aren't a threat to Apple, which still holds a secure spot in the high end with its iPhone, but Chinese manufacturers do pose a threat to many other well-known smartphone makers, even powerhouse Samsung.

Some Chinese-made smartphones are sold at $100 to $200 without a carrier contract (compared to more than $600 for an iPhone 6), which puts several traditional manufacturers on guard.

"You'll never find Apple in the $100 off-contract range, but Samsung has tried some entry-level phones while Chinese vendors have included top-end specs and still reduced their prices to gain market share," said Ramon Llamas, an IDC analyst. "That move has pushed Samsung back on their heels."

Llamas said low-priced Chinese-made smartphones do indeed represent a threat to some manufacturers. "It's just a question of how long Chinese manufacturers can seek volume sales over profit," he said. "It's harder to compete on the lower end. Knowing how costly it is to manufacture a smartphone, I wouldn't be surprised if some vendors are losing their shirts."

Even in the U.S., Samsung is less able to sell a midpriced smartphone off-contract, Hyers said. For example, he pointed out that the Samsung Galaxy S5 Mini would cost around $250 without a contract and said consumers would be more likely to choose a low-priced Chinese device that can cost $150 and has the basic features that many buyers want. In the U.S., customers are skipping midpriced phones and buying either premium smartphones, like the iPhone 6 or the LG G3, or low-cost, entry-level or near-entry-level devices, like the Moto G or the Lumia 500.


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