Microsoft has decided to prioritize enhancing Windows 11's performance for third-party gaming handhelds over its own Xbox handheld project, which may delay its launch originally planned for 2027. The company remains committed to developing its Xbox handheld in the long term but is currently focusing on optimizing Windows 11 for devices like ASUS's upcoming “Project Kennan.” This shift may be influenced by the competitive landscape, particularly the rise of Valve’s SteamOS, which offers advantages such as being free for hardware manufacturers and providing a user-friendly experience. SteamOS is currently supported on devices like the Steam Deck and Lenovo Legion Go S, and Valve is working to expand its compatibility. Jason Ronald, Microsoft's VP of Next Generation, indicated the company's goal to create a seamless Xbox-like experience on PCs, but the competitiveness of Windows 11 against SteamOS for gaming handhelds remains uncertain.