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Among the criticisms aimed at the original Zune released in the US last November was that it was little more than a re-badged and repackaged Toshiba Gigabeat and contained little innovation, save a battery-hungry and DRM-encumbered wireless music sharing feature.

Microsoft believes that having its own plant will give it greater control over the design and manufacture of the device, which has conspicuously failed to dent the popularity of Apple's iPod.

'There are definitely some cost efficiencies, but the more important thing from our perspective is the flexibility and control we have in creating a device from scratch and making it down to the last component

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what we want it to be,' explained Jason Reindorp, Microsoft's marketing director for Zune.

Microsoft is thought to be readying both a new flash-memory Zune to compete with Apple's shuffle and nano models and a slimmer version of the existing hard drive player. Reindorp would not confirm either, but did say that there will be different versions with varying storage capacities.

The company's decision to open a plant is its clearest admission yet that it has to make huge strides if it is to acquire anything like the design and manufacturing expertise that Apple has built up in five and a half years of iPod production. It is a big ask, given that Apple's iPod division is not standing still and next month the company will take another step further ahead with the release of the touch-screen iPod feature in the iPhone.

Microsoft has not said how much the new facility will cost nor when it will open, though Reindorp said that the first devices should appear in the autumn.