Though the iPod remains the undisputed champ of handheld media players, Microsoft is going to crawl (or build) their way to the top. Or so they hope, with their recent investment into building a dedicated Zune factory. The rumors have it that they will be partnering with an unnamed new manufacturer, and putting the facility near the same one that builds the Xbox 360. The new facility will be dedicated to building the second generation of Zunes. By being more involved with production, Microsoft hopes they can increase popularity:

The original Zune, released in November, was produced using a framework and components provided by Toshiba Corp. Reindorp said the company hopes that by taking a more direct role in manufacturing a second version, it will help the device gain popularity.
Zunes built from this facility are expected as soon as the fall, which is not far away at all. Microsoft did admit that they are facing many big challenges with the new Zune, ones that Apple may have already overcome with years of iPod manufacturing.