Analysts pessimistic about firm's chances due to heavy competition

BEIJING - The Chinese start-up company Xiaomi Corp on Tuesday announced plans to release a 1,999-yuan ($316) smartphone to compete with industry giants such as Apple Inc and Nokia Corp in the world's largest cell phone market.

The 1.5-gigahertz (GHz) dual-core Xiaomi Phone is seen as a dark horse and has been raising eyebrows among smartphone users.

According to Xiaomi's founder and CEO Lei Jun, it will be the fastest smartphone on the market, compared with Apple's 1 GHz iPhone 4 and the 1.2-GHz dual-core S2 from Samsung Electronics Co. Xiaomi's software and operating system are among the highlights of the phone, Lei said.

The phone comes packaged with Xiaomi's own applications and Google Inc's Android-based operating system.

"For the same reason why Google bought Motorola Mobility Holdings Inc, a company must be involved with software, hardware and services in order to compete," said Lei, who also serves as board chairman of Kingsoft Corp, one of China's biggest software companies.

The phone will be sold and shipped online. "Our online fans will be our target customers," Lei said, adding that Xiaomi's online forum has more than 500,000 members and about 40 percent of them are overseas.

However, analysts are not very optimistic about the Xiaomi Phone. "The market for the device is very narrow since it will only cater to customers in first-tier cities. I think the company is too naive about the cell phone market," said Kevin Wang, China Research director of iSuppli Asia Shanghai Ltd.

Wang said the company's chance of success is less than 50 percent and the device won't be a game changer in the cell phone market.

Xiaomi announced that the handset will start accepting online reservations on Aug 29 and begin shipments in October. However, Wang said that during the two-month gap, other Chinese smartphone makers such as ZTE Corp will launch new cell phones with similar functions and hardware.

Other analysts concur with Wang. "It's almost impossible to make money at such a low price. However, Xiaomi may have a chance if it can fully leverage its advantage in software services," said Sun Peilin, an analyst from the domestic research company Analysys International.

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