Not for profit: Chinese firm reveals first smartphone, prices it lower than production cost

Chinese video streaming site LeTV branched out into smartphones today with the launch of three models based at the high end of the market.

At an event in Beijing, LeTV CEO Jia Yueting slammed phone makers as “arrogant” for charging consumers more than double what their phones cost to make. Apple came under fire in particular for offering what Jia called a “closed” software ecosystem allied with a business model that charges people well beyond what the iPhone 6 or iPhone 6 Plus cost in production.

“We don’t need to make profit out of hardware,” he said. After spending more than two hours regaling a crowd of over 5,000 at an indoor stadium with the specifications for the three smartphones, Jia finally revealed the prices. Before doing so, he explained the process of calculating the “bill of materials” – known as BOM – for gadgets, and said his company would sell the phones to consumers for less than that figure. He also called on rival phone brands to be more transparent about how much their gadgets cost to make and vowed to be transparent in posting the full BOM calculations online for LeTV’s debut phones.

After much theater and marketing bluster, Jia said that the first of the three LeTV phones had a BOM value of RMB 2,865 (US$462). After calculating the true “mass production cost” of RMB 2,530 (US$409), Jia said the company – which is one of China’s largest video sites – decided to price the entry-level 5.5-inch-screened model at RMB 2,499 (US$403). That makes the similarly specced Apple phone about 2.4 times more expensive than the LeTV Le 1 phone. It even undercuts the Xiaomi Note Pro.

The three new phones – the Le 1, Le 1 Pro, and Le Max – all run LeTV’s EUI, which is based on Android 5.0.

Gunning for Xiaomi as well as Apple

While Apple came under assault for its pricing and for only giving 1GB of RAM in its latest phone, Jia’s presentation was filled with other references to Apple. Before his presentation, the screen onstage played Apple’s iconic 1984 ad, which was followed by LeTV’s own remake. There was even a “one more thing” – although very underwhelming – as the CEO (pictured below) said that he’d crowdsource suggestions for the price of the top-end Le Max model, but some of the crowd was already filing out by that time as the event ran to a little over 150 minutes.

The 1984 remake was a reference to the suggestion that LeTV wants to move smartphones into a new era of user interfaces that are better adapted to users. The examples that popped up in the presentation related mainly to more cross-content integration so that information is not so isolated in particular apps.

What LeTV has essentially created is a new Android-based software ecosystem – yes, yet another one. It’s adapted well to LeTV’s own content, like the TV and music apps, and is made to be put onto any LeTV screen, be it the firm’s existing smart TVs or its ambitious electric car that it teased late last year, but the promise of it being massively “disruptive” looks unconvincing.