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‘China’s Apple’ lays down challenge to iPhone, Samsung

Chinese technology company Xiaomi launched its flagship Mi 4 smartphone on Tuesday, as it sets out a further challenge to the might of Samsung and Apple.

In an event that bore striking similarities to an Apple product launch, Xiaomi CEO Lei Jun made several references to its Silicon Valley rival, comparing the Mi 4 to an iPhone.

"Our product really is better than the iPhone," Lei said.

Xiaomi official Facebook page

The Mi 4's release comes as smartphone giants are feeling the pressure from budget offerings in China. Smartphone makers in China accounted for 35 percent of global shipments in the first quarter of 2014, compared with 12 percent from their U.S. counterparts, according to Canalys.

Samsung threatened

Pressure from low-end device makers saw Samsung issue a profit warning this year, while Apple's response has been to release the iPhone 5C, its cheaper offering.

Read MoreChina's Xiaomi makes strides in smartphone race

Xiaomi's sales have been rapidly growing and after being founded in 2010 is now the world's sixth-largest smartphone vendor with 97 percent of its shipments being in mainland China, Canalys data showed.

And it is in China that Xiaomi will call the biggest damage to its mainstream rivals – with Samsung – the current leading smartphone vendor in China – the most under pressure from the release of the Mi 4, analysts told CNBC.

"I think that a company like Xiaomi probably is a threat more for Samsung because the growth of the market is shifting towards the low end tiers of smartphones," Roberta Cozza, research director at Gartner, told CNBC in a phone interview.

"More competition will come to Samsung from companies like Xiaomi that will come into the market that try to target the mainstream user."

Mi 4 specs

The Mi 4 specs rival the top tier iPhone and Samsung devices with a 5-inch screen and Android operating system. It also boasts a 13 megapixel rear camera.

Read MoreXiaomi takes a crack at India, can it succeed?

Xiaomi's phone will retail at around $320 for the 16 gigabyte model or $400 for the 64 gigabyte model. Apple's iPhone 5s retails at $649 while Samsung's Galaxy S5 sells for around the same price.

Business model could 'fall apart'

Xiaomi sells its phones for not much more than the cost price in a fiercely competitive smartphone market. It sold 18.7 million phones in 2013 and is eyeing up a 60 million sales target for this year.

The lower cost of the company's devices is due to the fact that it sells solely through its online channel and does not do partnerships with carriers which often subsidise the phone in developed markets through a line rental system.

Read MoreDoes Xiaomi threaten Apple's ambition in China?

Xiaomi also has its own version of the app store and makes money from the content it sells. While this approach is working in Asia, the model may "fall apart" if the firm tries to expand into developed markets, according to analysts.

"The big challenge for them is the fact they would have to change their business model if they move into developed markets because Google Play is firmly entrenched as the app store of choice," Daniel Gleeson, mobile analyst at IHS, said in a phone interview.

"The whole way that Xiaomi's model is set up doesn't translate well at all."

- By CNBC's Arjun Kharpal

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