Microsoft's Windows Phone 7 operating system has, so far, been an embarrassment for the firm. Since launching it a year ago the company has publicly admitted that sales have been lower than expected, and now the firm is telling potential customers that the cost of making Windows Phone devices will fall by 50 per cent over the next year.

Andy Lees, head of Microsoft's Windows Phone division told Bloomberg that devices running Windows Phone could be produced for less than $200, with Microsoft's main focus being to increase the number of devices sold rather than gross profit margin.