Lei Jun Shrinks Apple's Slice of China Smartphone Market

Cult Hero: A new tech boss wants his firm to take over Apple's title as the world's cool smartphone.

The company that introduced the world to smartphones has slipped into 7th place in China behind not only its main Korean rival but a handful of local Chinese brands, including one that is rapidly acquiring an Apple-like cult following.

As China pulls ahead of the US to become the world’s top smartphone market this year, nearly two-thirds of unit sales will go to Chinese smartphone brands, according to China Network Internet Information Center (CNNIC).

During the first half of 2012 the Apple iPhone’s 8% share of the market was exceeded not only by global brands like Samsung (21%) and Nokia (9%), but as well by domestic Chinese brands Lenovo (11%), Huawei (10%), Coolpad (10%) and ZTE (9%).

One reason, of course, is Apple’s premium price of 4,488 yuan ($712). By comparison Chinese brands range from below 1000 yuan ($160) for Huawei and Coolpad models to 1,999 yuan ($317) for domestic mid-level brands Meizu, Xiaomi and OPPO.

The Samsung Galaxy S3 began selling in China in June at the off-contract price of 4,999 yuan ($785).

Apple is likely to face intensifying competition and price pressure from fast-growing newcomers that have just begun showing up on the radar. The hot new smartphone among young Chinese is the Xiaomi Mi-Two, an Android-based device that manages to convey a cool, cultish image like the iPhone while costing less than half as much. About 7-8 million Xiaomi smartphones are expected to be shipped this year, giving it about a 5% share of China’s smartphone market.

Xiaomi even has a cool founder named Lei Jun who seems to be a latter-day Steve Jobs among Chinese. Not only has he managed to take Xiaomi from startup to a nearly instant success valued at $4 billion in less than two years, he has become an angel investor and a guru of China’s silicon valley. He has also introduced an innovative way to help finance the cost of his phones by tying it to premium internet services, putting Xiomi in the thick of an intense smartphone price war.

Lei, 43, graduated from Wuhan University with a computer science degree in 1991. By 1998 his books on Windows programming, DOS and other areas of computer science had earned him an honorary professorship at Wuhan University. He has since established a $36 million scholarship there for promising computer science students.

Lei prides himself on being completely homegrown, without the US educations of tech success stories like Baidu founder Robin Li or Sina founder Charles Chao. While being constantly compared to Steve Jobs, Lei has sought to distance himself from Apple’s founder by saying that Jobs couldn’t have been a success in China because his perfectionism would have been fatal to his chances of getting anything done there.