TikTok is the fastest-growing social media app, with about 500 million regular users.
The app, which lets people post 15-second videos, is estimated to have been downloaded more than a billion times on app stores.
TikTok developer ByteDance is making the move after acquiring patents and employees from device-maker Smartisan.
Besides TikTok, ByteDance owns several popular AI-based video and news apps, such as Slack alternative Lark, video-chat app Flipchat, and news aggregator Toutiao, but TikTok is by far its most popular offering.
The app has done so well with both Western and Asian audiences that it recently unseated Uber to become the world's largest privately backed start-up, with a valuation of $75bn (£61.4bn).
According to Chinese financial magazine Caijing, the new phone has been in development for seven months.