The hidden cost of affordable high-end phones in China

"Affordable high-end phones."

This phrase sounds like a self-contradicting mix of words, but it is exactly what flagship phones in China seem to be. Launching at prices severely undercutting high-end phones like Samsung Galaxies and especially Apple's iPhones in the West, these devices claim to have an identical set of features and hardware, just for a lower price.

But there is a catch.

One of the big stars of the Chinese smartphone market is Xiaomi, a poster child for the "affordable high-end phone" trend. The company that has quickly built up a presence in Asia as its phones severely undercut the prices of rivals. Xiaomi has also just recently entered the European market and its high-end Xiaomi Mi Mix 2 (read our review here) costs just €500, half the price of the Galaxy Note 8 and iPhone X. Yet still, it features a modern, bezel-less design and top-notch hardware. The price of the Mi Mix 2 in China is even lower.

So how is this even possible?

Users in the United States in Europe may not know this, but it turns out that Xiaomi has a very different and slightly shocking business model in China. While its phones run on Android,  they are heavily customized with the company's custom MIUI interface. But this is not just another Android skin: MIUI in China is... actually infested with ads.

This is not a bug, it is a feature. You cannot buy a Xiaomi phone with no system ads, it is actually the norm. In fact, Chinese users jokingly refer to the platform as "AdUI" because of it. Note that Xiaomi phones for other markets do not have system-wide ads, this is something that affects users in China.

To confirm that system ads are actually a feature, here is a recent Xiaomi promotion where the company sells a custom theme that you can purchase and enjoy a mostly ad-free experience for an added cost and limited time. Think of it a bit like Amazon's special offers on a phone, but in a much more intrusive way, with ads popping up at unexpected places and within the interface, not just on the lockscreen.

Here are the actual terms of a MIUI promo that is currently running in China (sloppily machine translated from Mandarin, emphasis ours):

This may be one of the clues as to why some phones in China can be so inexpensive. As the common saying goes, "when it's free, you are the product." It seems to be perfectly true in this case.

source: MIUI (translated)



1. KillerKeyboard

Posts: 372; Member since: Nov 21, 2013

"When it's free, your passwords, fingerprints, photos, videos, bank info, etc., are the products."

2. shandesilva

Posts: 105; Member since: Mar 28, 2012

So... That's all???... What about others like one plus ? How do they do it?

9. seanwhat

Posts: 321; Member since: Jul 11, 2013

those you mention are probably priced appropriately, whereas samsung's and apple's marketing and brand recognition allow them to price their phones higher and still sell.

16. Firenze91

Posts: 206; Member since: Nov 19, 2014

They don't give you headphones

3. notfair

Posts: 776; Member since: Jan 30, 2017

buhuhuuuu .... oooo the chinese are eating from the apple pie .. let's make an article about it and bash them.

4. DeDex

Posts: 121; Member since: Sep 01, 2014

The interesting part is that they are mentioning Xiaomi here, but what about other Chinese brands that produce "affordable high-end phones" and also sponsor PA, like Vernee, UmiDigi, etc.? Do they follow the same logic? The way the article is written, it should be named "the hidden cost of affordable high-end phones from Xiaomi", since there is no relevant information regarding other brands.

5. hemedans

Posts: 762; Member since: Jun 01, 2013

xiaomi use best hardware including latest 14nm soc. those you mention probably they use ancient mediatek soc, tft display, slow ram, slow storage etc

6. UglyFrank

Posts: 2200; Member since: Jan 23, 2014

14nm is old now

8. TheOracle1

Posts: 2340; Member since: May 04, 2015

Mi Mix 2 uses SD835 which is 10nm.

10. hemedans

Posts: 762; Member since: Jun 01, 2013

for highend soc? yes. but for low end and midrange it is latest,

14. MrShazam

Posts: 987; Member since: Jun 22, 2017

Exactly! This is merely presstitutes trying hard to justify their divine fruity's overpriced products. They just pick one that has the worst practices and generalize their actions to all other manufacturers selling reasonably priced products...

15. andrewc31394

Posts: 310; Member since: Jun 23, 2012

Xiaomi was just referenced because it's the biggest known Chinese brand....

17. truthbetold

Posts: 42; Member since: Oct 16, 2015

It seems to me that Xiaomi was referenced because they still haven't reached out to Phonearena for a paid promotional deal/featured article.

7. TheOracle1

Posts: 2340; Member since: May 04, 2015

I'm using a Mi Mix 2 with the Chinese rom and don't have ads popping up at all. I've disabled or uninstalled the bloatware too. This article is a little silly because we all know that the cost to produce an S8 or iPhone X is approximately $300, so selling a Mi Mix for $500 is quite feasible. The extortionate $1,000 phones should be the story here.

12. SrdjanK

Posts: 4; Member since: Jan 19, 2017

Ok, I log in to Phonearena REALLY rarely, but I had to do it now just to say that this is the single worst article I've ever read.

13. Diablo2424

Posts: 30; Member since: Jun 29, 2011

That's when you buy the phone affordably, then root and re-ROM it to remove the ads and bloatware

24. worldpeace

Posts: 3135; Member since: Apr 15, 2016

LineageOS available for all kind of xiaomi's models.. But as the article said, the ads is only for MIUI in China. probably their ads is irrelevant for non-china users, so they only add ads on china version

27. TheOracle1

Posts: 2340; Member since: May 04, 2015

I have the China version and there are no ads.

26. TheOracle1

Posts: 2340; Member since: May 04, 2015

My phone is stock with a locked bootloader so get your facts right. Obviously you don't know much about miui.

29. mootu

Posts: 1541; Member since: Mar 16, 2017

"26. TheOracle1 (Posts: 663; Member since: 04 May 2015) My phone is stock with a locked bootloader so get your facts right. Obviously you don't know much about miui." If you go to Xiaomi's official forums and ask for them to unlock the bootloader they will do so, plenty of people posting on UK forums have done this. Lots of people using non stock roms, and plenty to choose from on XDA.

30. TheOracle1

Posts: 2340; Member since: May 04, 2015

I know. But I prefer to stay stock. Suits me just fine.

18. truthbetold

Posts: 42; Member since: Oct 16, 2015

Without the Chinese brands challenging the dominance of the established brands, it's very likely we'd be paying Samsung and LG $500+ for "mid-rangers" equipped with SD435, 2500mAh batteries and 720p screens.

20. AmashAziz

Posts: 2934; Member since: Jun 30, 2014

We do.....sometimes. LG’s Q6 was priced higher than US$400, at launch in the US, and had a SD 435, and no fingerprint scanner!!! (From what I remember). Mean while, you can buy a Mi A1 for under $300 and get yourself a 5.5in, 1080p display phone, with SD 625, USB-C, fast charging, clean Android with Android One, flagship-class telephoto dual camera, metal build, Gorilla Glass, 4/64 GB Memories, and the best of all........a fingerprint scanner!!!!

19. Cyberchum

Posts: 1133; Member since: Oct 24, 2012

This is Victor, people; how shocked could you guys really be? Duh! . This Mister just can't disappoint me, as I stopped expecting a lot from him long ago.

21. p51d007

Posts: 705; Member since: Nov 24, 2013

NOTHING in the world is free. The "other" problem with a lot of these less expensive phones is depending on where you are in the world, it pays to CHECK CAREFULLY which modem frequencies they have. They may say "compatible" with carrier xyz, but, it may not work on LTE correctly. In the USA for example, some of the overseas phones WILL NOT work 100% on LTE because for whatever reason, Apple/Samsung have such a stranglehold on the market, I suspect it's cheaper to license from Qualcom or whomever the modem chip maker is, to NOT include "global" chips that have all frequencies.

28. TheOracle1

Posts: 2340; Member since: May 04, 2015

Your comment is the biggest crock of crap I've read on here in a long time. It's an Apple/Samsung conspiracy? Are you kidding? The reason they may not get US LTE is because they're not made for the US market. Nothing more.

22. UnlimitedSkye03

Posts: 300; Member since: Apr 27, 2012

I haven't seen any single ad with the Xiaomi phone I'm using. Victor you sound very delusional, stop licking Cook's balls.

25. worldpeace

Posts: 3135; Member since: Apr 15, 2016

The article did said "MIUI in China" but the way he write this article is as if ALL xiaomi's smartphone is invested with ads.. He's just being desperate to help apple's sales, probably this article can fools some people to avoid chinese brand and buy iPhone instead

23. ZEUS.the.thunder.god

Posts: 1184; Member since: Oct 05, 2011

So what about markets like India? These phones are half the cost of iPhone/Galaxy but with NO ADS. Also what about other lifestyle products Xiaomi makes, like Air Purifier, Headphones and a lot of other stuff at bargaining prices with top-notch hardware and software? Actually, they don`t spend billions on marketing and ad campaigns, They spend relatively less on R&D, among other reasons. Also, they don`t extort customers for profit margins like other big brands. The quality of hardware/software is not equal to Apple or Samsung but it`s decent and sometimes pretty close actually. So serving ADS isn`t the only way they`re able to provide great quality products at cheaper prices.

* Some comments have been hidden, because they don't meet the discussions rules.

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