With Windows 10 set to be launched later this summer, Microsoft will enjoy a lot of attention at this year's Computex, as visitors look to get a better glimpse into how the operating system and the apps that run on it handles various devices being displayed at the show. However, while the technology and new operating system features will keep the attention of most visitors, a number of market players will also be interested in looking at the latest Chromebooks as well, and trying to gather more information about how the software giant will price Windows 10 to address the threat from Google in the lower end of the market.

Windows 10 features and applications

In September 2014, Microsoft named the upcoming operating system Windows 10 and started to provide major insights into its features, announcing that a single Windows 10 platform would cover devices spanning PCs, tablets, Xbox and smartphones. And since then, the company has steadily provided more information about Windows 10, including features such as the Cortana personal digital assistant, a new Edge (Project Spartan) browser, and the Office universal apps, which have been rebuilt from the ground up to handle touch.

For Computex, Microsoft has announced that it will highlight Windows 10 running on smartphones, tablets, notebooks, gaming, all-in-one and IoT devices, with the demos focusing on five major scenarios (Home/ Entertainment, Productivity, Education, Retail, Security/ Manageability). Microsoft will also hold a keynote on June 3 to discuss Microsoft's strategy and how Windows 10 can deliver new business opportunities to the ecosystem.

Microsoft is being both ambitious and aggressive with its plans for Windows 10, as its previous recent efforts in the PC space failed to impress the market and the company's share in the smartphone space has remained submerged below 5% for years.

The company has already made plans to try to reclaim some of its lost market share in the mobile space - or at least leverage the market gains made by others - by announcing it is partnering with hardware players including Samsung Electronics, Dell and Pegatron Technology to pre-install Office programs on Android devices. More surprisingly, the company has also indicated that Windows 10 will also support apps developed for Android and iOS.

Pricing: Revising its strategy against Chromebooks

In terms of pricing, the company has already indicated that free upgrades to Windows 10 will be given to users of qualified Windows 7, Windows 8.1 and Windows Phone 8.1 devices and recent media reports have pointed out that New Egg has already listed the OEM version of Windows 10 Professional on its website at a sale price of US$150 (although this number is not confirmed).

However, in the notebook supply chain there have been rumblings that Microsoft plans on adjusting its pricing strategy in certain segments in order to better deal with the competitive threat posed by the Google Chromebook platform, especially in the education sector.

According to Digitimes reports, Microsoft is reducing the discounts on Windows licensing rates for many notebook makers, specifically for Windows 10, based on information provided by sources in the Taiwan notebook supply chain. Unsurprisingly, these sources believe this strategy is expected to dampen the willingness of international vendors to launch Windows 10 notebooks in the third quarter.

This move comes after Microsoft began offering discounts on Windows with Bing licensing last year in a bid to help partners better compete with Google Chromebooks. Those discounts were set at different rates based on the selling price of the notebook, with the lowest licensing charge being no charge (free), according to the Digitimes sources.

However, with the upcoming Windows 10 operating system, Microsoft has adjusted its licensing scheme, with discounts being offered based on hardware specifications instead of sales price and with the lowest charge increasing from zero to US$15, the sources indicated. Moreover, notebooks sized at 14-inches and larger are not qualified for any licensing discounts.

The sources attempted to explain the adjustment by noting that the original discount for Windows with Bing have proved to be useless in helping vendors compete against Chromebooks. In 2014, there were 5.5-6.0 million Chromebooks shipped globally and shipments in 2015 are expected to reach 7.0-8.0 million units. There is strong demand for Chromebooks in the North America market, mainly for use in the educational sector, but Google has also begun cooperating with emerging markets such as China, India and Indonesia to boost Chromebook sales in emerging markets.

There are also questions in the supply chain as to whether Microsoft feels it really needs to be aggressive in the PC space. Microsoft may give less importance to PC business due to decreasing global demand and has instead shifted its business focus to offering of cloud computing services, especially Azure-based Big Data analysis, to compete with Google, the sources surmise.

However, Digitimes Research disagrees with the rumors floating around the supply chain about Microsoft's commitment to the PC market and instead attributed the changing Microsoft strategy to a more focused, more vendor specific program. The research arm of Digitimes pointed out that it agrees that Microsoft does not wish to continue the same price-cutting strategy it maintained in 2014 to defend against Chromebook penetration in the market, but instead the software giant realizes it needs to release even cheaper notebook solutions in order to compete against Chromebooks. Digitimes Research believes Microsoft will partner with Acer, Lenovo and Inventec to offer Windows 10 notebooks priced in the US$169-249.

This comes after Microsoft has already made plans to cooperate with Elitegroup Computer Systems (ECS) to launch an inexpensive 11.6-inch notebook priced at US$179 for the education market. Microsoft now plans to also partner with Acer and Lenovo to release these inexpensive Windows 10 notebooks between mid-August and the end of the fourth quarter.

Details of the inexpensive Windows 10 strategy include an 11.6-inch notebook (US$169) and a 14-inch clamshell-type notebook (US$199) from Acer and a 14-inch convertible Yoga notebook (US$249) from Lenovo. These devices will be manufactured by Inventec, and will be situated in the market to compete against Chromebooks.

The three notebooks are expected to bring pricing of the Windows 10-based notebooks to a new low. Moreover, Instead of being built around Intel Bay Trail-T CR processors, which are broadly used in entry-level devices, these machines will use higher-end Broadwell processors, showing Microsoft's aggressiveness in support of the project.

When asked if the Microsoft project will be able to stem the growth of Chromebook shipments, Digitimes Research indicated that the program will best show that Microsoft has the ability to offer inexpensive notebooks,.

Digitimes Research did note though that the project will greatly benefit Inventec. The ODM has recently seen its relationships with notebook vendors dwindle down to Hewlett Packard (HP) being its only major customer.

This project will re-establish Inventec's ODM partnership with Acer after three years. Digitimes Research estimates that the two notebook models from Acer will increase Inventec's notebook shipments by over 500,000 units in the second half of the year, but the inexpensive Windows 10-based Yoga notebook will only have a limited shipment contribution to Inventec in 2015, as volume shipments may not begin until midway through the fourth quarter. Despite the limited contribution, the partnership will still help link Inventec with Lenovo in the notebook industry.