Microsoft delays the Xbox handheld to respond to the big threat from Valve

Microsoft has been quietly working on a first-party Xbox handheld device for quite some time now, and just as rumors and reports were heating up that the green team was getting ready to showcase the new device, its launch has been delayed.

The news has come from Windows Central's Jez Corden, who exclusively reported yesterday that the first-party Xbox handheld was now delayed, per an internal announcement at Microsoft.Now, Corden has penned an explainer piece as to why it was a good decision for Microsoft to delay its first-party Xbox handheld to make way for third-party Xbox handhelds such as ASUS's upcoming device codenamed "Project Kennan" and Windows 11 gaming optimizations.

In a nutshell, Microsoft delayed its Xbox handheld because it's facing its most legitimate threat in the gaming market in decades, and that threat is coming from Valve, specifically SteamOS.

Since the Nintendo Switch provided the proof of concept for a gaming handheld market, many different brands have been hopping into the space to try and draw some success from the now exploding genre of gaming hardware. The most popular devices in this space, besides, of course, the Nintendo Switch and Android-based devices, are running Windows 11. Devices such as the ASUS ROG Ally, MSI Claw, and Lenovo Legion Go S are all Windows 11-based, and while they provide adequate gaming performance, a true competitor has surfaced: SteamOS.

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Since Valve recently made SteamOS available for third-party handhelds, meaning other brands can simply adopt the operating system, Microsoft now has a major competitor in the gaming handheld landscape. To illustrate the competition is real, Dave2D recently published a fantastic video demonstrating the performance difference between the Windows 11 Lenovo Legion Go S, and the SteamOS Lenovo Legion Go S.

The only difference between these two devices was the operating system, and the test results told a very bleak story for Microsoft. The SteamOS version of the Lenovo Legion Go S sported 50% better battery life than its Windows 11 counterpart, while also having higher average framerates and general performance.

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SteamOS now being available to third parties means Windows 11 could be left in the dust, even if it comes with Game Pass, as Original Equipment Manufacturers (OEMs), such as MSI, ASUS, and Lenovo, will simply opt for the operating system that makes their device play the games the best -- not to mention those gamers get access to Steam and it's massive library of games. Moreover, if gamers are choosing devices such as SteamOS Lenovo Legion Go over the Windows 11 model, why would OEMs continue to select Windows 11 over SteamOS handhelds?

As Corden writes, Microsoft doesn't have much time to ensure it has a presence in the PC handheld market. Losing footing in the market regarding OS adoption is extremely hard to make up, especially if your competitor is blowing you out of the water, which leads to bad branding for your devices.

Microsoft needs to stay on par with SteamOS, and to achieve that, it has decided to delay the first-party Xbox handheld, shift all focus on optimizing Windows 11 on handheld devices, and make sure the launch of the upcoming Windows 11-based ASUS ROG Ally 2 is smooth and competitive.