A German security firm has highlighted that smartphones made in China may be pre-loaded with spyware, which compromises the privacy of its user.

In the last decade, smartphones have gained a lot of popularity in the entire world. Along with the basic functionality of a phone, a smartphone also offers other capabilities like browsing the Internet, listening to music, GPS navigation and more. A user is required to have an Internet connection to use many functions of the handset. However, logging to the Internet without sufficient security software in place can pose threats to smartphones as well especially, if they already have spyware pre-installed.

Security firm G Data Software reports that it has discovered a smartphone, which comes pre-installed with spyware straight out of the box. The report suggests that the malicious app is camouflaged as Google Play Store and the app runs on the background and users cannot detect it. The malware sends personal data from the smartphone to servers that are believed to be located in China. The app can also allow installation of additional malware without the user's knowledge.

G Data Software has identified the smartphone as "N9500" manufactured by Chinese company Star. The security firm also points out that the smartphone looks very similar to a top-end smartphone manufactured by a reputed and well-known handset manufacturer.

"The only thing users see is an app with the Google Play Store icon in the running processes; other than that, the application is completely disguised," says, Christian Geschkat, Product Manager Mobile Solutions. "Unfortunately, removing the Trojan is not possible as it is part of the device's firmware and apps that fall into this category cannot be deleted. This includes the fake Google Play Store app of the N9500."

The N9500 is said to have a price tag of between 130 and 165 euros, which is considered to be relatively low when taking into account the standard of technology deployed to the device. A powerful quad-core processor powers the smartphone and the handset comes packed with a number of accessories such as a secondary battery, car charger and a cover. Smartphones of similar standard produced by reputed companies are priced three times or more.

Geschkat says that the price of the smartphone is covered by selling personal data of the users to hackers.

Good smarthphones from reputed companies such as Samsung, Apple, LG, Motorola and more can also be quite steeply priced. Chinese smartphones are usually cheap, which makes them an attractive buy. However, with the privacy of the user on stake, many smartphone enthusiasts may be deterred from using handsets made in China altogether.