In China's smartphone market, which is set to overtake the US as the world's largest by the end of this year. Phone makers are now striving to squeeze the ever booming smartphone market from each otherm, including a host of little-known local firms that are primed with cheap and cheerful handsets. In the latest local challenge to the iPhone, Xiaomi Technology has launched its second generation smartphone.

A larger screen, lighter, but a more powerful battery, Xiaomi's second generation smartphone Mi2 features a quad-core processor, 8 mega-pixel camera and a voice-assistant similar to Apple's Siri. But the smartphone, which goes on sale in October, is priced at 1,999 yuan, or 310 US dollars. It’s less than half the price of other popular smartphones sold in China, such as Samsung's Galaxy S3 or Apple's iPhone 4S.

However, the smartphone cannot completely ward off the influence from Apple's iPhone, from its design to the similarities with Steve Jobs' product demonstrations. For young Mi-phone aficionados, a big step forward has been made in the new generation smartphone.

Liu Cong, Company Staff in Beijing, said, "I expect the price will be around 2,500 yuan. But it's priced at 1,999 yuan, which is spectacular."

Xu Bo, Beijing Resident, said, "The CPU and its processing powers are now at the top among all smartphones sold in the market. And its prices are affordable. But its sales are lacking behind. It was sold only via internet."

And Lei Jun, a newly minted Chinese billionaire and CEO of Xiaomi, says its success comes from its adherence to customers' needs. But he said the company has no plans to change its current sales channel.

Lei Jun, CEO of Xiaomi Tech, said, "It's a tip of an iceberg that we sold only 3.5 million sets of smartphones in China's vast market. But for a single-model smartphone M1, it's not easy. I think it's a sign that our guideline of "achieving what fans want" has achieved success."

Analysts say while iPhone sales will increase in China, Apple's market share may stagnate or even dip as the market's changing demographics mean the iPhone may just flourish in a handful of wealthy Chinese people.