Rumors are surfacing (no pun intended) once again that Microsoft is developing their own smartphone to run Windows Phone 8. A report published yesterday from China Times reignited rumors although no evidence or sources were mentioned. Today, however, WPCentral and BGR both claim independent sources have indeed confirmed that Microsoft has their own handset (no, not the ill-fated Kin) in the works.

In fact, sources told WPCentral that the hardware already exists and is in testing. Details about the device weren’t revealed but they did say it’s something unique compared to the current lineup of Windows Phone 8 handsets.

It wouldn’t be a stretch of the imagination for Microsoft to create their own mobile hardware for WP8. After all, they were able to develop the Surface tablet under a veil of secrecy. Granted, other vendors were made aware of the tablet ahead of time but the general public and those in most tech circles were none the wiser until the very end. Microsoft certainly has the resources to pull it off.

With several vendors already set to release Windows Phone 8 smartphones later this month, wouldn’t Microsoft once again risk alienating partners by launching their own phone? Not necessarily. As WPCentral speculates, they could mirror what Google is doing by offering their handset carrier-free. It’d give Microsoft an opportunity to showcase what they believe a Windows phone should be without imposing too heavily on hardware partners.

Alternately, a Microsoft phone could serve as a backup plan should the current batch of WP8 handsets fail to catch on with consumers. Nokia has invested a lot of time and money into the platform but if it doesn’t go as planned, internal hardware could bail Microsoft out of a tough situation.