China’s Xiaomi Guns for Apple With Latest Premium Smartphone

  • The Mi 5S is intended to out-do the iPhone, founder says
  • Biggest version costs less than half the most expensive iPhone

The Battle for China's Smartphone Market

Xiaomi Corp. took the wraps off its strongest contender yet to the iPhone, a 2,599 yuan ($390) plus-sized device with dual cameras and a pressure-sensitive screen that’s less than half the price of Apple Inc.’s top-of-the-line model.

With the 5.7-inch Mi 5S Plus, Xiaomi, once known as a purveyor of inexpensive but innovative phones, is taking aim at fans of premium devices. It’s the Chinese startup’s most powerful device, sporting one of Qualcomm Inc.’s speediest processors as well as 6 gigabytes of memory. With a screen that detects varying degrees of pressure -- much like Apple’s 3D Touch -- and 13-megapixel cameras, it stacks up well against the iPhone in the specifications department.

Xiaomi Corp.’s Mi 5S Plus

Source: Xiaomi Corp.

Xiaomi needs a hit. It’s slipped behind Huawei Technologies Co. and Oppo in a home market it once dominated, while efforts to make headway in Latin America and India have stalled. Samsung Electronics Co.’s global recall of the Note 7 opens a window of opportunity not just for Apple, but also for Xiaomi to try and wrest market share away from the global leader.

“We were aiming to challenge Samsung and Apple in camera capability. With the Mi 5S, I believe we beat both of them," co-founder and chief executive Lei Jun said at a launch event in Beijing at which it also introduced a 65-inch, 4K smart television.

Apple is counting on the latest iteration of its flagship product to regain the top spot in China, its largest overseas market. But unlike in years past, the iPhone 7 offers little that resonates with Chinese consumers: no affordable models such as the SE or 5C, a radical redesign, or features that truly push the technological envelope. Investors speculate iPhone 7 sales may even lag last year’s, depressing its stock.

The new iPhone does feature a water-resistant design, upgraded camera and faster processor. The larger Plus model sports a back-facing dual camera that allows for crisper images, particularly in low light. It also comes with a pressure-sensitive Home button that provides a vibrating sensation instead of a click. The bigger version goes for more than 6,000 yuan in China.

Xiaomi is following Huawei and Oppo into the higher end of an intensely crowded Chinese smartphone market, encroaching on Apple’s traditional sweet spot. That will be key to shoring up margins as Xiaomi -- which missed its 2015 sales target -- continues to develop and put out products like TVs and robot vacuums in a gradually easing economy.

“The price tag of the Mi 5S Plus made the device very competitive. With all the upgrades, the device is only a few hundred yuan pricier than the Mi 5. We think the new product will be very popular,” said Nicole Peng, China research director at Canalys.

The Mi 5S Plus and the smaller, 1,999 yuan Mi 5S go on sale Sept. 29, though not in the U.S. The company, whose plethora of products include rice-cookers, is preparing to enter the American market by employing the same online sales and social media marketing that helped the six-year-old company become China’s largest privately funded startup.

While it hasn’t specified when it will move into the U.S., the smartphone vendor is in a better position these days to launch an incursion onto Apple’s turf. In June, the Beijing-based company announced the acquisition of nearly 1,500 technology patents from Microsoft Corp. -- a deal that may smooth potential legal tangles over intellectual property as it pushes abroad.

Back home, Xiaomi’s taking another page from the U.S. company. It aims to open hundreds of stores in coming years, adopting an approach that’s helped not just Apple but also local rivals like Oppo.

“Xiaomi already has a strong online sales channel, but we are also trying hard to build our offline sales network so more customers can try out our products in real life,” Lei said.

(A previous version of the story corrected the smartphone’s name to the Mi 5S)

— With assistance by Yuan Gao

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