While Lenovo and Xiaomi are two of the biggest smartphone manufacturers in China, the former seems to be hungry for more. In an effort to better compete with the smartphone startup, which sells most of its phones online, Lenovo has announced that it will set up a new smart device company in China, which will have a different brand name and will focus on selling devices online.

"The objective of this move is to help Lenovo attack the fast growing consumer mobile device market in China", the company said in a press release, adding that the new company will exclusively focus on direct-to-consumer sales, marketing and product development using an internet-based business model.

The company reiterated that it will continue to sell Lenovo-branded smartphones through local carriers and retailers.

Chen Xudong, currently president of Lenovo's China geography and Asia Pacific - Emerging Markets, will become CEO of the still unnamed new company, while Liu Jun, executive vice president and head of Lenovo's Mobile Business Group, and George He, senior vice president and head of Lenovo's Ecosystem and Cloud Services Group, will be the co-chairmen.

Although Lenovo is the world's largest PC maker, it sells more smartphones than PCs. The company is the world's fourth-largest smartphone maker by shipments, and is the third largest smartphone vendor in China, the world's biggest smartphone market.

Xiaomi is known for competitive prices, its own mobile software known as MIUI and its use of targeted marketing. The company recently surpassed Samsung to become China's top smartphone vendor and is now the world's fifth-largest smartphone manufacturer.

Lenovo says the new company will become operational on April 1 next year. Meanwhile, the PC maker is also in the process of completing the deal to buy the Motorola Mobility handset business from Google in the US.