Nokia is understood to be developing a mobile phone that runs on Google's Android software platform in a strategic U-turn for the world's largest mobile phone manufacturer.

The new touchscreen device will be unveiled at the Nokia World conference in September, say industry insiders, as the Finnish handset giant tries to revive its fortunes in the smartphone market.

Nokia, which makes roughly four out of every 10 mobile phones sold, has been losing out in the market for phones that can access the internet, send emails and download third-party applications, to products such as the Apple iPhone and BlackBerry Storm. The Android software platform, meanwhile, has been gaining ground with over half a dozen handsets expected to be available by the end of the year.

Analysts at HSBC reckon Nokia had 47% of the global smartphone market in 2007; that was down to 35% last summer and 31% at the end of the year.

The smartphone segment is critical as it is the only part of the mobile phone market which is growing. Cash-strapped consumers are either holding on to their existing phones and opting for cheaper SIM-only deals or "trading up" to more advanced gadgets such as the iPhone.

Opting to use Android, an "open source" platform that any software developer can access, is a reversal of the company's previous strategy in mobile phone software.

A year ago, Nokia bought out the partners in its Symbian mobile software joint venture and announced plans to make its products free of charge to other manufacturers in an attempt to see off the threat posed by Android and the iPhone.

But the response to the opening of Symbian has been relatively muted. By contrast, users of the iPhone have already downloaded over a billion applications in just nine months and Android has attracted a host of developers offering their "widgets", or applications, to consumers through the Android Marketplace.

Gadget fans have already hacked one of Nokia's existing devices, the N810 internet tablet, so it can run the Android system but the new device is expected to fully integrate the Android platform.

There has also been speculation that Nokia is looking to extend its smartphone range as a result of its recent deal to collaborate with chip giant Intel. Nokia was unavailable for comment, however.