Microsoft could be making its own Windows Phone 8 Surface smartphone, putting the company in further competition with its hardware partners following the unveiling of the Surface tablet.
The rumour first popped from the China Times.
The China Times story says Microsoft has contracted smartphone developers and assemblers in China to build a Microsoft-branded Windows Phone 8 phone for sale sometime next year.
The Boy Genius Report quotes two unnamed sources saying Microsoft plans to release the Surface smartphone in the coming months to compete against iPhone 5, Samsung Galaxy S III and other high-end phones.
Surface is the name of Microsoft's tablet scheduled to launch October 26 along with the Windows 8 operating system.
If true, the rumours will mean two things: Microsoft is further risking the ire of its hardware partners by competing against them, and it is adopting the same model that Apple has used in making and selling iPads and iPhones by controlling both the hardware and software associated with the devices.
The company already caused a flap with its plans to sell Surface tablets and laptops. Acer and Lenovo responded that Microsoft ought to think twice about competing against established tablet makers and Lenovo said Surface would have a negative effect on the PC market.
Nokia, Samsung and HTC have all agreed to produce Windows Phone 8 devices in the coming months.
While licensing its software to partners who sell it on their own hardware has been Microsoft's PC model for years, things are different with tablets and phones. Whereas Microsoft dominates PCs, that is not the case with tablets and smartphones, where Apple throws its weight around with iPhones and iPads.
Apple's model is to control the software, hardware and applications, which is where Microsoft seems to be going with the Surface tablet and where it would be with smartphone if the rumours are true.