DST, an existing investor, is among the potential participants in the funding round, said one of the people.

Xiaomi’s valuation would also exceed recent funding rounds that pegged U.S. startups Uber Technologies Inc. at $17 billion and Snapchat Inc. at $10 billion. Forbes reported on Oct. 31 that Xiaomi was seeking a valuation of more than $40 billion. A representative for DST, run by Russian investor Yuri Milner, couldn’t be reached for comment.

?In an interview in September 2013, CEO Lei said Xiaomi wouldn’t sell shares to the public in the next five years.

Xiaomi more than tripled global smartphone shipments to 17.3 million units in the third quarter from 5.6 million a year earlier, IDC reported Oct. 29. Its market share more than doubled to 5.3 percent from 2.1 percent, the researcher said.

That lifted Xiaomi into the world’s top three vendors for the first time, trailing only Suwon, South Korea-based Samsung Electronics Co. and Apple Inc. in Cupertino, California, IDC reported. Cross-town competitor Lenovo subsequently completed its purchase of Motorola in a combination that would have made it the third-largest vendor, according to IDC.

Eoin Treacy's view

As Chinese and other Asian fabless manufacturers move up the value chain in terms of expertise and build quality, it is inevitable that they will become even more potent competitors. While potential rewards can be outstanding, the risk of failure is also nontrivial as witnessed by Nokia, Research in Motion and HTC. 

With smart phones becoming ubiquitous it is interesting that Apple has decided on adding lifestyle products and payment options in order to lock customers into its ecosystem while other manufacturers are attempting to compete on price while also offering an increasingly competitive Android suite of apps. 

Xiaomi’s position as the world’s third largest manufacturer from a standing start three years ago is truly impressive and is a testament to China’s ability to produce globally competitive companies. 

Lenovo bounced in the middle of last month from the region of its 200-day MA and a sustained move below it would be required to question medium-term scope for additional upside.