The 'Russian iPhone' becomes another China handset

Smartphone companies outside China just can't seem to catch a break. The Financial Times learned recently Russia's Yota Devices will move development of its YotaPhone to Shenzhen. This is symbolic for Russia, where the phone was presented as the "Russian iPhone," as the country’s prime minister Dmitry Medvedev called it. Russia’s president Vladimir Putin gave a second generation YotaPhone to Xi Jinping in 2014. Alas, Russia was not destined to become a innovation hub.

The YotaPhone received initially some attention in the press when it launched because of its unique design. The phone has a regular LCD screen on one side and an E Ink screen on the other. The buzz led to some competition from China makers. As it turns out, however, there was not much demand for this kind of hybrid device.

Yota was hoping the YotaPhone 3 would see sales of 1 million units after releasing this year, but development stalled and its rollout was pushed back to 2017. The first two YotaPhones only sold 75,000 units. The device also failed to crack the US market, which is another big hurdle for the company. Now, a lower-cost version of the YotaPhone 3 is being developed by Coolpad and it will be sold in China under both brands.

Yota is only the latest casualty of China's aggressive smartphone manufacturing industry. Suppliers from the country have flooded the market with relatively inexpensive, high-quality handsets such as the OnePlus 3 and ZTE Axon 7. Huawei is now one of the largest smartphone makers in the world and plans on besting Samsung for the top spot within the next few years.

While Apple still maintains its cache, other US brands have suffered. Motorola Mobility was eventually sold to Lenovo after being bought up by Google. Lenovo was hoping Motorola would be its ticket to global smartphone prominence the way IBM boosted its PC business, but that hasn't come to pass yet. Smartphone competition in China has proven quite fierce.

The good news for mobile phone buyers is that China manufacturers have no shortage of great options. Affordable handsets can still do well in a saturated market. It's how the US startup Blu has been able to gain a small foothold. For more expensive niche products such as the YotaPhone, however, an iPhone-like success will probably always be out of reach.