Microsoft got into the tablet market last month when it finally released the first batch of devices in the Surface range.
It was also reported that a smartphone would arrive under the same moniker, giving mobile fans the definitive Windows Phone 8 experience.
Now a report from Digitimes suggests that Microsoft is currently courting Chinese manufacturer Foxconn, with a view to using its facilities to build the Surface phone.
Although details about the capabilities of the Surface phone remain thin on the ground, one source has been cited as saying that it will have a screen measuring 4 to 5 inches across the diagonal, as well as Windows Phone 8.
Meanwhile, Amazon is also rumoured to be sniffing around for a manufacturer for its first Kindle smartphone, which will run Android and could hit the market in 2013.
If both Microsoft and Amazon strike deals that let them launch own-brand smartphones next year, then competition will really start to heat up, as both of these companies have money to burn and will need to plumb plenty of this into marketing, if they want to overturn the incumbents like Apple and chief rival Google.