Wang Jingwen, a Shanghai-based analyst at Canalys China, said major Chinese vendors are facing the strongest headwinds in their home market since the smartphone boom began in 2011.

Wang said lower price is no longer the main criterion for Chinese smartphone buyers as customers have started to focus on user experience.

"Consumers are losing their appetite for ultra-low-cost devices, as expectations increase in line with spending power and－combined with rising market saturation－this is resulting in a major shift to devices that provide better user experience," she said.

But the price war is kicking off. Last month, online video company LeTV Holdings Co Ltd said its first-generation handsets, with a screen size similar to Apple Inc's iPhone 6 Plus, will "crush" Apple and Xiaomi because of low price and high performance.

The device is equipped with Qualcomm Inc's fastest mobile chip and is selling at 2,499 yuan, which is a fraction of the cost for the iPhone 6 series. LeTV said it received more than 2.6 million orders for its device less than two days after the online pre-sale started.