The maker of China’s first cloud-based mobile phoneis expectedto release an improved version next month, according to industry sources and Chinese media reports. Beijing Tianyu Telecommunications Equipment is readying a follow-up to the K-Touch Cloud-Smart Phone W700, which launched in late July to amuted response from a smartphone market more interested in the battle between Apple’s iPhone and challengers running Google’s Android operating system.

The new Tianyu phone will have a bigger screen, longer battery life and better performance than its predecessor. The phone’s key distinguishing feature—its cloud-computingoperating system developed by a subsidiary of e-commerce giant Alibaba Group—also gets an upgrade. The phone will sport version 2.0 of the Aliyun (Ali Cloud) operating system but details of specific improvements to the OS, which come less than three months after its debut, are sparse. Sources say the cloud-based operating system, which runs apps by sharing resources over the mobile Internet, has faster data-transmission speeds and shorter system-response time.

Rong Xiuli, chairwoman of Beijing Tianyu, reportedly called the sales performance of the original K-Touch Cloud-Smart phone “acceptable,” although she acknowledged that its market performance didn’t meetinitial expectations. Rong said the company has sold about 200,000 of the smartphones, which carry a steep pricetag of RMB 2,680 ($416).

The price of the new phone is not yet known. But Beijing Tianyu isanticipating better sales when a deal with China Unicom for a subsidized subscriber package including the phone plus a discounted data plan is finalized. “Based on the current sales performance,” Rong reportedly said, “we are confident that we would be able to sell more than 1 million Aliyun phones within one year especially when we obtain the subsidy from China Unicom. We are looking forward to seeing a significant increase in the sales.”