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Meet the $299 smartphone you can only get by invite

A start-up Chinese smartphone maker is having a one-hour flash sale for customers to buy its $299 smartphone, which is normally available by invite only, but analysts said the stunt might not help it survive in the crowded mid-market.

OnePlus, which was founded in December 2013 and is part of the wider Chinese electronics company Oppo, released its OnePlus One smartphone earlier this year. Fans who supported the device on the Shenzhen-based firm's forum were sent invites in order to purchase the smartphone. Those who bought it were then given three invites to give to friends.

Carl Pei, director of OnePlus' international arm, told CNBC that the reason behind the strategy is that the company sells the cheap Android-based devices at "breakeven" and does not want to manufacture more devices than it can sell.

One Plus One Smartphone
One Plus

"Our model when you sell phones is that we keep a slim margin, we don't make money on the phone but we don't lose money on the phone," Pei told CNBC in a phone interview.

On October 27, OnePlus is opening a one-hour window for customers to buy its model, in an attempt to broaden the appeal. The company offers a 16 gigabyte version at $299 or a 64 gigabyte model for $349.

"We started this because we didn't know what demand would be so we have taken some units aside as a buffer for this event," Pei said.

'Unknown brand'

But analysts aren't convinced the company's strategy will work. Ian Fogg, head of mobile at IHS, said the tactic of going straight to consumers in a world where many people buy their smartphones through carriers will be difficult to pull off well.

"The model of going direct to the consumer is a difficult one to execute in a market where the operators are the channel through which most consumers buy phones," Fogg told CNBC by phone.

Fogg also added that networks only have a certain number of brands they sell and it is "unlikely" it will flog an "unknown brand".

Model sustainable?

Pei said that the company is not aiming to turn a profit with its smartphones but instead said it is eyeing software to drive revenues. While the company is not currently working on software, its aim is to build a large base of users to sell to.

"We see that hardware is increasingly becoming (a) distribution vehicle for software so in the future that will be the key place for us to drive business and make money," Pei said.

OnePlus is also entering a fiercely competitive space – the mid-priced smartphone sector. Brands such as Motorola, Sony and LG already operate in the area and making inroads will be tough for OnePlus, analysts said. This could raise concerns about its long-term viability.

"It is getting more crowded so tougher to sell and there may end up being a race to the bottom on pricing," Neil Mawston, mobile analyst at Strategy Analytics, told CNBC by phone.

"There is going to be a scramble to get the best features at the lowest prices meaning profit in the longer term will be hard to come by. There is a question about whether OnePlus One is sustainable."