Huawei is looking to promote its Honor brand to capture territory from Xaiomi. The Huawei handsets– of which there are several models – sell in the same approximate $350 price category as Xiaomi's phones. The Honor range is promoted through creating a buzz on social media and is sold online.
"For the first time Xiaomi is seeing a strong competitor on online channels, so Huawei is taking the game directly to them," Neil Mawston, mobile analyst at Strategy Analytics, told CNBC by phone.
Honor is still a small part of Huawei's overall smartphone portfolio but revenues for the range rocketed to $2.4 billion last year from $109 million in 2013 and accounts for roughly 20 percent of the company's consumer business group. Huawei also sees software and services being a big driver of revenue – just like Xiaomi. Around 25 percent of Honor's revenue came from software and services last year.
This approach is also crucial to Xiaomi, whose philosophy is based on selling smartphones at razor-thin margins to gain scale and then monetizing users through selling software. This strategy has led to Xiaomi being the number one smartphone player in China and third globally, according to analytics from both Canalys and IDC.