An Internet company in China has unveiled a low cost smartphone as a cheap alternative to Apple’s iPhone, hoping to make forays into the smartphone crazy domestic market regarded as the world’s biggest.

The low-cost but high-specification Xiaomi Phone, produced by Xiaomi Technology, comes at a price tag of 1,999-yuan ($313), which is 3,000 yuan or $470 cheaper than the iPhone4.

The smartphone, a MIUI ROM on top of Android, weighs heavier (149 grams) and bigger than the iPhone 4.

It has a fast dual core processor, big screen, high- quality signal and a large battery capacity, Lei Jun, founder of Xiaomi Technology, said after launching the phone here.

The new phone was designed for a market where mobile phone connections crossed 926 million, inching towards a billion.

A total of 16.81 million smartphones were sold in the Chinese market in the second quarter of the year, up 7.5 per cent from the previous three months, according to the IT consulting firm Analysys International.

Analysys has said that the number of smartphones sold in China could reach 95 million for this year.

Phones produced by Taiwan-based company HTC, Lenovo’s LePhone and the iPhone are among the best sellers in China.

Lenovo claimed recently in a report that it sold 34 per cent more cell phones in the first quarter year-on-year. Its 2,900-yuan LePhone has also been selling well. Also, Lenovo this month unveiled its second smartphone, the A60, which has a 88.9-mm touch screen and uses the Android 2.3 operating system, priced at 959 yuan.

But, the real change in China’s smartphone market is that domestic Internet firms are starting to compete in it.

Competition in the smartphone market may get fiercer as international competitors look to grab a bigger slice both in China and worldwide.

But, so far, Chinese companies have only captured a small piece of the global market.

Zhu Junmin, a Beijing-based telecom expert, said domestic companies’ smartphones are still lagging behind in terms of designing. “Foreign brands do better in industrial and user-oriented designing. Lack of innovation makes domestic companies to have to follow and imitate.”