1.5 GHz Xiaomi Phone Blows China’s Shanzhai Mobile Manufacturers Out of the Water

Lei Jun (雷军) is a legendary home grown geek in China. He hails from HuBei XianTao, the same hometown as Diandian’s founder Jack Xu, and graduated in computer science at WuHan University. Since mid 90s, Lei Jun has invested in some of the top local and international software and internet companies including Amazon.cn and KingSoft, of which he is currently CEO.

Yesterday, Lei Jun gave a Steve Jobs-style keynote speech introducing the first Android Xiaomi Phone (小米手机). In terms of hardware specifications, it is among the top-end Android phones, with a price tag that couldn’t be anymore competitive at RMB 2000, or USD 313. China’s mobile market is the largest in the world, and Lei Jun’s latest attempt to conquer it is the most convincing one I have seen in a long time.

Xiaomi, the Startup

Xiaomi (小米) as a startup is perhaps one of the most high-profiled in China. Apart from Lei Jun, the other 6 co-founders are 3 ex-Googlers, 2 ex-Motorola, 1 ex-Microsoft and 1 ex-ArtCenter. The company itself managed to raise USD 41 million from MorningsSide Ventures, QiMing Venture Partners and IDG International Data Group. From 56 Xiaomi employees including the 7 founders, an extra USD 11 million was raised. The company is currently valued at USD 250 million.

Xiaomi’s structure is divided in to three main components:

1. Miui.com – Miui, an Android based modified firmware [see review] with mods that are specifically designed for the Chinese market, it is also the mobile OS that ships on the Xiaomi Phone.
2. Xiaomi.com – portal site for Xiaomi Phone, will also act as it’s main sales outlet, opening up to users for online pre-order and purchase.
3. Miliao.com – Xiaomi’s ‘Kik messenger’, now supports a voice messaging feature that was first introduced in Talkbox.

Now lets talk about the Xiaomi Phone.

Xiaomi Phone, A Smart Phone Design Tailored for China

Out of respect for Steve Jobs and his iPhone, Lei Jun’s keynote came very close to cloning Mr. Jobs’ classic speeches. It is perhaps with that in mind that the Xiaomi Phone’s exterior design resembles a cross-breed of iPhone and HTC Android phones. (Image source: Sina Tech, see full album here)

The phone itself boosts top range hardware with an impressive Qualcomm MSM8260 Dual-Core 1.5G CPU, the fastest ever in an Android phone, the other specifications include:

• 1G RAM,
• 4 GB capacity, can expand to 32G.
• Sharp 4 inch display, resolution: 854-by-480-pixel resolution.
• Battery: 1930mAh.
• [See video and detailed review of tech specs]

A key point in Lei Jun’s presentation about the suppliers of this hardware was that they are “proper market suppliers,” not the usual shoddy excess supply channels from whom Shan Zhai phone factories source their parts.

Lei Jun has a clear challenge for the rest of local Chinese mobile manufacturers makers: “My phone is quality and yours are Shan Zhai.”

The next bombshell Lei Jun dropped was pricing, at an incredible RMB 1999 Chinese consumers can expect to buy a Dual-Core 1.5G smart phone with more tailor-made Chinese Only features than any other phones available in the local market. This was certainly mostly unexpected prior Lei Jun’s announcement. Especially when other local smart phone makers are targeting their initial offering price around RMB 2500. The Chinese smart phone market will be facing a shake up when Xiaomi Phone launches for sales in October.

Apart from the local competitors, the higher end foreign smart phones will also face considerable pressure from this competitive pricing that can only be regarded as the initiation of a possible price war.

Of course, the top target for anyone with a high-end product is the iPhone. According to the latest smart phone market research from ZDC, iPhone’s global market share is 16.8% and thanks to it’s hugely successful iPhone 4, it aims to capture over 10% of market share in China by the end of 2011 (it currently stands at 9.2%). But iPhone in China is still considered as a luxury product in lower tier cities where the main bulk of mobile users are concentrated (it’s priced at RMB 4999). The introduction of Xiaomi Phone gives consumers a chance to own a top-end phone at less than half of the price.

On the topic of authentic Chinese local engineered smart phones, let’s look at the top local competitors Xiaomi Phone will be facing:

1. Meizu M9 – launched in Jan 2011, its key selling point was its 3.5 inch 960×640 hi-resolution multi-touch screen. M9 is currently priced at RMB 2499, but has tech specs far inferior to the Xiaomi Phone.
2. Alibaba w700 Cloud Phone – the first cloud-based smart phone by Alibaba was co-produced with K-Touch and is priced at RMB 2680. This phone’s OS is yet another modified Android firmware. Alibaba, the parent company of Taobao.com, China’s dominant eCommerce site, offered a RMB 1000-off special offer for a limited time. And yes, w700′s hardware specs are also lesser than the Xiaomi Phone.
3. Lenovo LePhone – now into its second generation, I’m sure Lenovo will continue to improve the hardware specs. In particular, the 3-megapixel camera is weak. The LePhone is yet another modded Android firmware that’s priced at RMB 2899.
4. OPPO Find - OPPO is often referred to as Shan Zhai by consumers, but their trying to build a mainstream brand. Ogilvy China was rumored to be hired for RMB 500 million to run a promotion campaign complete with heartthrob Leonardo DiCaprio as the male lead. But detailed specs for the phone have yet to be released and the price is unknown.
5. HTC Sina Weibo Phone (not local-engineered) – this very same model is branded the ‘Facebook phone’ in the U.S. In China it’s modified to incorporate Sina Weibo and Sina’s WeiLingDi LBS service via a dedicated button. But with weak hardware specs and a RMB 2340 price tag, it’s not at all competitive. We at TechRice see this as no more than a marketing gimmick by HTC for a phone that cannot stand on its own merit.

Personally, a pre-order of the Xiaomi Phone is definite for me.