Smartphone firms to feel the force of Russia's Yota

Chinese smartphone producers, beware. The Russians are coming.

Less than a week after Russian President Vladimir Putin presented a domestically designed dual-screen smartphone as a State gift to President Xi Jinping in Beijing, Yota Devices, maker of the unique handset, is planning to challenge Chinese players including Xiaomi Corp.

According to Vladislav Martynov, chief executive officer of the Moscow-based company, the YotaPhone 2 will enter the Chinese market by the first quarter of 2015, largely via online channels.

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"We're happy to say that we are already seeing keen interest (in the Chinese smartphone market)," Martynov said in an e-mail on Wednesday.

"The arrival of the YotaPhone 2 is a smartphone game changer," he said, adding that the double-screen design and 50-hour battery life give Yota the potential to open up "completely new market opportunities".

Yota was little-known among Chinese smartphone buyers a week ago. But the company quickly became a top search entry in the country shortly after Putin showed off its reading-friendly back screen - similar to the paper-like e-ink screen on Amazon.com Inc's Kindle - during the Asia-Pacific Economic Cooperation Economic Leaders' Meeting on Sunday.

Yota is an emerging brand, even in Russia. But Martynov said that the employees' global vision will mean strong results for Yota in the international market. Yota's software development team is based in Moscow, while its hardware development takes place in Oulu, Finland. The company has hired former staff of multinational tech giants including Nokia Corp, BlackBerry Ltd, Motorola Mobility (a division of Lenovo Group Ltd) and Microsoft Corp.

Yota has sold 4 million devices capable of using fourth-generation telecom networks since 2009. Martynov said Yota may open its own brick-and-mortar stores to boost sales in China. But it is unclear how the company will respond to the foreseeable pushback from local vendors.

Wang Jingwen, a Shanghai-based analyst with industry consultancy Canalys China, said: "The price of the Yotaphone in Russia is about $300 while in India, it is about $380. At that price, there are a lot of products from local vendors that have better specifications. "The competition in the Chinese smartphone market is very intense," Wang added.

Local players including Xiaomi, Lenovo and Huawei Technologies Co Ltd are on the brink of ousting South Korea-based Samsung Electronics Co from the top spot in the smartphone market. Apple Inc, the most valuable handset manufacturer in the world, was only the sixth-largest smartphone brand in China by shipments, said local researcher Analysys International.

According to IDC, Xiaomi and Lenovo together accounted for more than one-third of global smartphone shipments in the third quarter because of strong sales in China.

The imminent rise of Chinese producers will not only threaten multinationals, it will also hurt small regional manufacturers because of cost advantages.

"Although the e-ink display might be very attractive for some heavy readers, it will be extremely difficult for Yota to achieve big shipments in China," Wang said.

"With the fast development of online shopping, sales channels are not as important as they used to be for vendors. However, with so many local online competitors, standing out remains a problem for Yota," she said.