Xiaomi has to tackle Huawei first before taking on Samsung

Cameramen focus on Xiaomi's new tablet at the device's unveiling on May 15, 2014 in Beijing. [Photo provided to China Daily]

Even with its first large-screen model for sale, Xiaomi may find it hard to outrace the world's second-largest smartphone brand Samsung, especially as the company is in a close match with Huawei, said analysts.

Huawei has more patent advantages than Xiaomi in the international market, said Xu Hao, researcher with industry consultancy Analysys International. Both the companies launched their high-end products in the past six months.

Xiaomi Corp introduced its latest model Mi Note on Thursday. The device, equipped with a 5.7-inch screen, sells at a floor price of 2,299 yuan ($370).

The live broadcast of the launch ceremony attracted 5.7 million viewers, becoming the most-viewed program in the category, according to Internet media company Tech Web quoting data from online video platforms Youku and Tudou.

Huawei launched its Mate 7 in September. The phone with 6-inch screen supports fingerprint identification, and is priced at 2,999 yuan. The industry expects the company to release an undated version Mate 8 later this year.

Jockeying for high-end users

"You can see from the Mi Note that Xiaomi is paying more attention to building its brand value," said Xu Hao, adding "other domestic brand such as Huawei and Lenovo are completing their product chain by introducing high-end devices as well."

Xu pointed out that though the latest model will help promote the company's profit margin, phones priced around 1,000 yuan will remain as its bestseller.

"Red Mi line will likely continue to contribute a large chunk of its sales volume in international market," said the Beijing-based researcher.

"It remains to be seen whether Xiaomi could retain its position as the world's third-largest smartphone vendor, as the fourth quarter data of last year is still being finalized," said Yan Zhanmeng, senior analyst at industry consultancy IDC China.

Yan expects the latest Mi Note to gain popularity among advanced regions, including Hong Kong, Taiwan and Singapore, while users from emerging countries such as India and Malaysia will be more inclined to purchase its cheaper models.

"Strategically speaking, Mi Note's role is to broaden Xiaomi's customer base by filling the gap of high-end users," added Yan.

Going global

Though hopes are high for a one-on-one competition and even shift in position between Samsung and Xiaomi, analysts who spoke to chinadaily.com.cn dismissed the possibility in near future.

"Samsung has more advantages in product design and patent reserve," said Xu Hao, adding Samsung has been reflecting on its strategies and will likely improve its sales in the next move.

Samsung is not the sole competitor, and despite Xiaomi's marketing approach to take on iPhone, its real direct target may not the two smartphone behemoths, said Yan Zhanmeng.

Nomura expects the growth rate of China's smartphone market to continue to slow in 2015 due to saturation of the smartphone adoption rate and operators' subsidy cuts, but Chinese brands will sustain 20 to 25 percent growth driven primarily by exports demand.

"Xiaomi's overseas sales will grow at a faster pace than its domestic market," said Yan.

Xu added that Xiaomi will play catch-up in its patent issue. The company has been sued in Indian courts over IP disputes and the case is due for hearing on Feb 5, according to Reuters.