Qihoo 360, a leading internet company in China, is investing $409 million to take a 45 per cent stake in a joint venture with smartphone maker Coolpad.

The venture will design, manufacture and market mobile devices that are distributed via the internet – following the marketing strategy of fast-growing rival Xiaomi. Smartphones will be sold under the existing Dazen brand.

In a statement the companies said the JV will leverage Qihoo’s mobile app development and online marketing capabilities and Coolpad’s design, production and supply-chain management expertise.

Qihoo 360 is the leading provider of internet and mobile security software in China, according to Beijing-based iResearch. As part of the partnership, Coolpad smartphones will be bundled with a number of Qihoo 360 mobile services, including its security software, app store and mobile search.

Coolpad is the largest 4G smartphone vendor in China with a market share of more than 15 per cent, according to China-based Sino Market Research. The company expects to ship more than 20 million 4G handsets this year.

Qihoo 360 chairman and CEO Zhou Hongyi said that by combining Coolpad’s smartphone experience with its strong presence in mobile internet, “the partnership will build one of the leading mobile internet ecosystems in China”.

Sina Tech reported yesterday that Qihoo 360 was looking to invest CNY5 billion ($816 million) to acquire a Shenzhen-based smartphone maker. Zhou’s Weibo (microblog) page indicated the company has had interactions with smartphone makers OnePlus, Meizu, ZTE and Coolpad over the past six months.

The company’s Q3 financial statement showed it had $1.6 billion in cash reserves, C114.net reported.

In 2012 Qihoo 360 provided a number of handset makers with marketing and software support. It is a fierce rival of Xiaomi and has engaged in a “large-scale war or words” with China’s top smartphone maker, according to the portal.