Leading domestic Internet security company Qihoo 360 Technology Co on Wednesday unveiled a new smartphone featuring anti-virus software, highlighting safety issues involving mobile devices.

The new QiKU smartphone comes with the property insurance app powered by Qihoo 360, in addition to a virtual private network designed for securing smartphones, according to Qiku's Weibo account.

Customers who are covered by QiKU's insurance can receive payouts of up to 120,000 yuan ($18,722) every year, the company's Weibo account said.

Qihoo 360 invested $409 million in a joint venture with Shenzhen-based Android phone producer Coolpad Group, a move that marked the company's start of an expansion into the domestic smartphone market, news portal ifeng.com reported in May.

Before the launch of the new phone, Qihoo 360 developed the new Android-based operating system, which is said to be easier and faster to use, apart from the security features.

The company also plans to launch such products in overseas markets, since the smartphone markets in India and Southeast Asia have developed rapidly in recent years, Pan Zhiyong, vice CEO of Qihoo 360, was quoted as saying in the report by ifeng.com.

Qihoo 360 is one of many companies rushing to enter the growing domestic smartphone market, motivated by the prospect of huge profits as millions of Chinese reportedly upgrade from older feature phones.

This situation indicates that the competition will be fierce when the company squares off against local big names, including Xiaomi Inc, ZTE Corp and Huawei Technologies Co, as well as foreign makers such as Apple Inc and Samsung Electronics Co.

Qihoo 360 generated revenue equivalent to $384.4 million in the first quarter, up 45 percent from a year earlier.

As Qihoo 360 already has experience in protecting smartphone users from malicious attacks, the new QiKU smartphone will be more effective in securing mobile devices compared with products from rivals such as Xiaomi and Huawei, said Liu Dingding, an analyst from Beijing-based Internet intelligence agency Sootoo. 

"Safety is a basic requirement for smartphone users, and a better configuration and price will help QiKU beat its competitors," Liu told the Global Times Wednesday.

Zhu Dalin, an analyst at Beijing-based market research firm Analysys International, agreed.

Zhu told the Global Times Wednesday that as Chinese smartphone manufacturers face stiffer competition, many of them have to come up with lower prices and advanced configurations.

"QiKU has just entered the smartphone market. It still needs to build up a customer base and expand its sales channels," Zhu said.

The smartphone market is becoming increasingly saturated in China, Kitty Fok, managing director at US research firm International Data Corp (IDC) in China, was quoted as saying in the firm's smartphone report for the first quarter, which was released in May.

The market contracted about 4 percent year-over-year in the period, according to IDC.

"The price battle will continue in China's smartphone market," Zhu said, noting that more vendors will use multi-faceted strategies.

For example Xiaomi and Huawei are pushing into the higher-end segment while still making cheap devices. 

Qihoo 360 phones will cost from 1,199 yuan to 3,599 yuan.

"[Amid fierce competition], Chinese phone makers, particularly start-ups, need to figure out which specific group they are targeting by selling at cheaper prices," said Liu.