China's Xiaomi launches $US129 handset ahead of rumoured budget iPhone

Xiaomi has gained popularity in China for selling phones with high-end specs, at lower prices

China's popular Xiaomi smartphone company is diving into the country's low-end handset market with a new product, taking note of the rumors that Apple is preparing its own budget iPhone.

Xiaomi's new Xiaomi's new "Red Rice" phone is made for China's low-end market.

On Wednesday, Xiaomi unveiled its new "Red Rice" phone for the no-contract price of 799 yuan ($129). It has a 1.5 GHz quad-core processor from MediaTek, a 4.7-inch, 1280 by 720 pixel screen, and an 8-megapixel rear-facing camera.

Although not well-known outside China, Xiaomi has gained major name recognition in its home country, partly by selling Android handsets with high-end specs, but at low prices. Its flagship phones have gone for the price of 1999 yuan ($329), less than half of what it costs to buy a no-contract iPhone.

With its new Red Rice phone, Xiaomi is bringing down the price of its handsets even further to target China's low-end handset segment, where phones can be sold at 1000 yuan or cheaper. In a news release, the company also referenced reports pointing to Apple launching a cheaper iPhone in September.

If launched, the much-rumored budget iPhone could end up costing consumers around $300, according to analysts. This could put the budget iPhone in more direct competition with Xiaomi's flagship handset.

Apple, while still popular in China, has seen its smartphone market share stagnate and shrink, as domestic vendors push out more affordable handsets in droves. In response, the U.S. tech giant has tried to sell its older iPhone 4 and iPhone 4S handsets as a way to maintain its market share.

As for Xiaomi, the company's market share in China in the first quarter was only 3 percent, said Nicole Peng, an analyst with research firm Canalys. But its new Red Rice phone will help Xiaomi further expand its product sales into China, especially in the country's smaller cities.

The Red Rice phone is also specifically built for the country's largest mobile carrier, China Mobile, which has over 700 million customers, she added. In contrast, Apple has yet to officially sell its iPhones through the carrier.

Xiaomi still only sell its phones in China and Taiwan. But the company will explore next year expanding into five other foreign markets, Xiaomi's CEO said in May.

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