Trying to sell their phones to the Chinese for five times what Chinese consumers could afford at the time crippled sales, and Chinese companies were more than willing to crank out cheap, ripped off designs. Nokia responded by dropping the price of their flagship handset to the same as the price of the shanzhai units.
In the last 15 years, the Chinese are no longer stealing designs, but making their own, and still managing to undercut the competition. Android's open source nature has created a virtuous circle, giving phone manufacturers the software they need to power the phones, but leaving it up to the makers to source the hardware.
Attempting to figure out the smartphone market in China isn't easy. Despite higher sales than Apple, Samsung hasn't raked in the revenue that's it's Cupertino based rival has:
By right Samsung should have been able to capitalize on this particular weakness of Apple, given that it has a whole range of smartphones with different price points targeted at a variety of consumers. In terms of unit sales, Samsung is doing extraordinarily well, given that analyst firms have consistently ranked Samsung as topping the charts in China’s smartphone shipments.
With Xiaomi making it's much vaunted debut in the Chinese smartphone market has caused something of an upset. Their CEO doesn't want you to call it China's Apple, but they're going to have a hard time dropping that moniker. Even if they aren't aiming at the higher end smartphone market, by smartly tying in services and deals with existing Chinese content providers, they do everything that the average Chinese consumer wants - at a much lower price, depressing the market price for higher end models. Working smarter, means that as Apple and Samsung lick their wounds for Q2 2013 Xiaomi is aiming for double it's revenue in 2013 than it made in 2012.
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