Coolpad, the world's sixth largest smartphone manufacturer, installed a back door that allows the company to install applications, send alerts, and monitor communications without user knowledge or approval.
According to Palo Alto Networks, which discovered the security flaw, the "CoolReaper" backdoor has been found on 24 Coolpad phone models sold in China, adding up to over 10 million devices.
"The malware was deliberately pre-installed with the default operating system that comes with these phones," said Ryan Olson, intelligence director of Palo Alto Networks' Unit 42.
"This is the first time we've ever seen a manufacturer install a back door like this."
Olson said that their security researchers were originally tipped off by user complaints on forums, and then discovered the backdoor built into the ROM in such a way that it would not show up for antivirus detection programs.
To control access to this backdoor, Coolpad set up a Website that was actually accessible by the public.
"The functionality in that interface matched up exactly by CoolReaper, and it was on the open Internet, and it let anyone log into it," Olson said.
"The back door that they had created, maybe for what they thought was legitimate purposes, could have been in the hands of a bad guy."
As of deadline, Coolpad's Asia-based spokespeople did not respond to requests for comment by CSO Online, and the company's US-based representatives could not be reached.
However, the company told the Wall Street Journal that Google had notified it of the Palo Alto report, but denied that the download function amounted to a back door.
According to Coolpad, the downloads were enabled by users and were designed to improve the user experience. Coolpad told Bloomberg it issued a software update, but the update was designed to address Android compatibility issues and were not related to illegal software or a "backdoor."
"There are some capabilities that we expect manufacturers to have, like the ability to install over-the-air updates," said Olson.
"And Coolpad has a completely separate application for those updates. And we expect manufacturers to grab statistical data and diagnostic information about the phone -- not personal information, but how the phone is performing."
But the CoolReaper application went far beyond, he said.
For example, CoolReaper can be used to send notification to the smartphones. Normally, when users receive notifications, they can touch the notification an extra long time and see which application generated the notification, and turn off the notification if they wish. This "long press" function was disabled on CoolReaper notifications.
Similarly the built-in API for installed applications was modified so that CoolReaper did not show up in the list of apps.
CoolReaper can also see or delete SMS messages, send messages, delete user data, uninstall or disable applications, and even make phone calls to any number.
"This kind of complete control, hidden control, this is new," Olson said.
So far, the CoolReaper application has only been found on Chinese versions of the Coolpad smartphones, he added.
"They're also selling in other parts of Asia and Europe," he said. "But they have different models in different regions."
Olson added that it's never a good idea for a manufacturer to install a back door on a device.
"When you create a backdoor, you think it's only going to be used by you," he said. "But you've purposefully made the system less secure."