It looks like Microsoft is nowhere near done with the mobile department after all, and it is making progress in the development of the Microsoft Surface Phone.

Taiwan-based publication Commercial Times claims that Chinese supplier Pegatron has teamed up with Microsoft again for the Redmond giant's smartphone flagship.

Pegatron is reportedly preparing to begin production trials for the Microsoft Surface Phone, which means that the device is not canceled after all.

Microsoft has enlisted Pegatron for the production of its newly unveiled Surface Studio, which makes it likely that the company is working with the supplier for the Microsoft Surface Phone as well.

Additionally, Microsoft CEO Satya Nadella has recently said that the company is not done with mobile devices yet and is, in fact, looking to create "the most ultimate mobile device."

Commercial Times also reports that the flagship will be powered by an Intel mobile processor and will feature a new and improved Continuum that will allow for x86 emulation.

Interestingly, it was reported that the Microsoft Surface Phone will be powered by the Qualcomm Snapdragon 835 processor.

The mobile chipset will be the first from Qualcomm to make use of the 10-nanometer technology, which will allow Microsoft to make the Surface Phone thinner or use a bigger battery pack.

Either chipsets will do when it comes to Microsoft's efforts to have the Microsoft Surface Phone run x86 apps, which is something that the Continuum in its current state is unable to do.

Although the Microsoft Surface Phone is already in production testing, Commercial Times says that Microsoft will not release it until late next year or early 2018. However, a 2017 unveiling is expected.

This is also likely since, like what Mary Jo Foley of ZDNet said, Microsoft could be waiting for the Redstone 3 update for Windows 10, which is not coming until late next year.