Asustek Computer has set target global shipments of 16 million smartphones for 2015, with China to be a focus market, but is expected to face difficulty due to price-performance competition in the China market from Xiaomi Technology, according to Taiwan-based supply chain makers.

Asustek has treated Xiaomi as its major competitor in China since its entry into the smartphone market with the ZenFone series in 2014 and is looking to achieve better price-performance ratios than the China-based vendor. However, Xiaomi has recently cut the price of its entry-level Hongmi smartphone for China's Singles Day promotions (Double 11) and has put strong pricing pressure on Asustek, the sources said.

Currently, the 4G-based Hongmi 1S and Hongmi Note are priced at CNY599 and CNY899, respectively, the lowest among models with similar specifications.

Asustek has achieved strong sales with its ZenFone products in markets such as Taiwan and Southeast Asia and is also aggressively entering countries such as Russia, Brazil and the UK. In 2014, Asustek is expected to ship 7.5-8 million smartphones, the sources noted.

Currently, Asustek still suffers losses of NT$2-3 billion from the smartphone business, but if the company is able to ship over 16 million units in 2015, the company expects the business to contribute profits of NT$2 billion, making it a new income generator, the sources added.

Asustek is ready to unveil its second-generation ZenFone series smartphones at CES 2015 and will also release a 5.5-inch model to satisfy demand. LTE-based models will account for over 40% of Asustek's smartphone shipments in 2015 and China and the US will be the major target markets for these models.

As for Xiaomi, according to recent data published by IDC, the China-based vendor shipped 17.3 million smartphones in the third quarter, surpassing Lenovo and Huawei to become the third-largest vendor worldwide. Digitimes Research, which monitors shipments from the supply chain to the OEM rather than shipments to end-users, had a lower estimate and believes that Xiaomi's worldwide shipments totaled 13.8 million units, ranking fifth behind Samsung Electronics, Apple, LG Electronics and Huawei.