Is this Xiaomi's newest rival in China?

Here comes another China smartphone maker
Here comes another China smartphone maker   

A new range of low-priced smartphones by a company known as the 'Netflix of China' is threatening to upend Xiaomi's dominance in the competitive consumer device market.

The sleek Le1, Le1 Pro and Le Max are the products of Chinese online media firm LeTV and were made available for pre-order in China on Tuesday.

Famous for its popular video and television streaming site, LeTV is a powerhouse in Chinese entertainment, offering everything from local series to American favorites like House of Cards.

The Android-powered devices run LeTV's Ecosystem UI, a system that transfers the company's entertainment library to the phone and they are also aggressively priced, with the entry-level Le1 costing $245, compared to $370 for Xiaomi's Mi Note.

"What makes LeTv unique is that it's not a phone vendor, they are the Netflix of China," said Bryan Ma, vice president of client devices research at IDC. "Their phone business is comparable to Amazon. LeTv's core business model is selling content; the phone is just an enabler to do so, like what Amazon has done with its phones and tablets."

"This is definitely a threat for Xiaomi," said Neil Shah, research director of devices and ecosystems at Counterpoint Research. "Both companies have similar business models of using hardware as a distribution tool for their respective content, but LeTv is miles ahead in terms of content and services. "

Read MoreWatch out GoPro, Xiaomi's coming for you

Xiaomi has been on a push to develop online television content in the past six months. Last November, it said it would spend $1 billion to do so and it has since acquired a stake in streaming site Youku Tudou and invested $300 million on Baidu's online-video arm iQiyi. But its efforts pales in comparison to the 500 million daily viewers that LeTv's streaming site draws.

ChinaFotoPress | Getty Images

Moreover, LeTv already has an existing ecosystem of millions of users, and that should boost smartphone sales, Shah added.

For now, LeTv is focusing on selling content to overseas Chinese customers. In March, it signed a third party content deal with Netflix where Chinese users in the U.S. can access LeTv's Chinese media content on Netflix.

Challenges ahead

To be sure, Xiaomi's strong reputation in China cannot be ignored, said Mark Newman, senior analyst for global memory and consumer electronics at Sanford C. Bernstein. The smartphone maker recently broke a world after selling 2.1 million phones in 12 hours during a flash promotion in April.

China's number two smartphone brand enjoys fierce loyalty from its customers, which won't make it easy for new entrants like LeTv, Newman said.

Moreover, LeTv's diversified range of offerings could be a negative factor, according to IDC's Ma.

This isn't the first time that the Shenzhen-listed firm has ventured into the hardware market. In 2013, it launched smart television sets and set-up content boxes that delivered online videos but it was forced to stop one year later following a ban by regulators.

The firm also confirmed late last year that is working on an electric car, and recently inked a partnership deal with Aston Martin at this year's Shanghai Auto Show to provide the luxury car maker with in-vehicle entertainment technology.

"What is their ultimate motive? The company is a bit all over the place," questioned Ma.