Apple Inc out, home brands in

"Devices lower than 1,500 yuan are for basic needs such as web browsing and companies usually provide full functions in 3,000-yuan-plus products," Li said.

When Apple CEO Tim Cook unveiled the much beloved iPhone 5S in the second half of last year, many had expected a sales nightmare for local vendors.

Chinese makers were dwarfed in front of the powerful and well-designed new iPhone at a time when they were also facing strong competition from South Korea-based Samsung Electronics Co Ltd. Pessimists worried that 2014 will see local smartphones been swept out of the mainstream market and overseas companies will enjoy high profit margin.

Three months into the "death year", local manufactures are finding themselves thriving in the niche market of mobile phones with special functions.

Ratings of local companies, such as ZTE, OPPO, Xiaomi Corp, Huawei Technologies Co Ltd and Lenovo Group Ltd, have seen a surge in 2013 compared to the previous year.

Instead of avoiding face-to-face challenge from Apple and Samsung, Chinese smartphone makers have found new ways to beat the competition, analysts said.

"Customers in China are more rational than three years ago and tend to find a balance between price and frequently-used functions," said Lv Junkuan, a Gartner analyst.

The shift in the purchasing habit will bring local vendors opportunities to tap into some detailed market demands such as young people who like to take selfies or commuters who want to watch videos in subway, Lv said.

Wang Yan'en, a researcher at the website, said the average price of smartphones sold in China was on a steady decrease since 2011 because of rapid update in technology and fiercer competition.

The average price of a smartphone was 2,321 yuan in 2011 while the price slumped to 1,773 yuan last year.

The price was dragged by huge sales volume of inexpensive home-made devices.

Prices of smartphones made by Lenovo, Xiaomi and Huawei are significantly lower than their overseas rivals, such as Apple and Samsung.