Lenovo to challenge Xiaomi on smartphones with new company in China

Lenovo's new company will sell mobile devices under a separate brand name

In China's smartphone market, Lenovo wants to fight fire with fire against rival Xiaomi by setting up a new mobile devices company that will use a separate brand, and leverage the Internet to sell directly to consumers.

The still unnamed company will help Lenovo "attack the fast-growing consumer mobile device market in China," Lenovo said in a statement Wednesday.

Competitor Xiaomi was not named. But the new Lenovo company will operate with what sounds like a similar business model, according to details provided in the announcement.

Like Xiaomi, which has cultivated a huge fan base in China through its own website and social networking services, Lenovo's new company will also focus on "close customer engagement".

Sales, marketing and even product development by the company will rely on an "Internet-based business model," Lenovo added in its statement.

Lenovo already has a thriving handset business in China that in the second quarter was about neck and neck with Xiaomi for the top spot in the country's smartphone market, according to estimates from research firm Canalys and IDC.

Lenovo's current smartphone business has been following a more traditional business model, and selling its products through China's different mobile carriers, retail stores and its own online channels.

Xiaomi, on the other hand, has been disrupting China's smartphone market, by largely selling its phones online directly to consumers. The company prides itself on engaging customers for input on product improvements, in addition to offering phones at cheap prices that have undercut competitors' products.

Lenovo's new company will become operational on April 1, with more details to come in the following months.

Other rivals in China, including Huawei Technologies and ZTE, have also been stepping up to compete with Xiaomi by focusing on online sales and offering phones at lower prices. In 2012, ZTE set up its own independently managed team to build a new smartphone brand called Nubia, which has grown in popularity in the country.

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