Microsoft is said to be working on an upcoming Surface Phone, instead of a new Windows Phone. An earlier report from Windows Central said Microsoft canceled plans to launch a new Windows Phone that will be powered by Intel and will run Windows 10. It was originally set to be announced on May 2016.

The cancellation is to give way to an entirely new phone, the Surface Phone which Panos Panay and the Surface team are reportedly working on. The Microsoft Surface Phone is also set to release on the second half of next year.

Forbes noted that the Redmond-based tech firm has not been successful in its attempt in the smartphone business, even with the launch of the new OS Windows 10. According to Gartner IT, Windows Phones has 1.7 percent market share in Q3 2015,a drop from last year's 3 percent.

Microsoft smartphones like the recent Lumia 950 and 950XL target emerging markets in order to see more profit growth. However, the budget smartphone space is a competitive market that these phones hardly make any profit.

On the other hand, the premium phone segment is led by Apple Inc., generating a 40 percent gross profit. The premium smartphones also account 90 percent profitability of the smartphone industry.

With that being said, Forbes finds Microsoft's decision to consider making premium quality phones at higher prices, better than making and selling cheap phones.

With Intel involved, the Surface Phone might become a real computer that also works as a phone, instead of a device that relies mainly on applications. Microsoft might insert a powerful processor from Intel that is far more powerful from the current chipsets on smartphones today, speculated Christian Today.

The Microsoft Surface Phone might make it possible to deliver a seamless phone-to-PC transition where users can continue working on the app from their phone to their desktop and can even place calls on PCs using their smartphones, said WinBeta.