Lenovo to challenge Xiaomi on smartphones with new company in China

Lenovo's current smartphone business has been following a more traditional business model, and selling its products through China's different mobile carriers, retail stores and its own online channels.

Xiaomi, on the other hand, has been disrupting China's smartphone market, by largely selling its phones online directly to consumers. The company prides itself on engaging customers for input on product improvements, in addition to offering phones at cheap prices that have undercut competitors' products.

Lenovo's new company will become operational on April 1, with more details to come in the following months.

Other rivals in China, including Huawei Technologies and ZTE, have also been stepping up to compete with Xiaomi by focusing on online sales and offering phones at lower prices. In 2012, ZTE set up its own independently managed team to build a new smartphone brand called Nubia, which has grown in popularity in the country.