Industry analysts are saying that Microsoft is making excessive profits on its Windows operating system (OS) by maintaining current licensing fees, even with a continuous decline in PC prices. Thus, the share of Windows in the manufacturing prices of PCs and tablets has more than doubled.
According to industry sources on Feb. 10, the licensing fees for Windows OS used to make up about 10 percent of PC production costs, but those fees now represent 20 percent, owing to falling PC hardware prices. In some cases, the licensing fees comprise 40 percent of the retail price of entry-level computers.
Thus, PC sellers have increased the share of computers without any operating system. To date, Taiwanese and Chinese PC makers have mainly provided those computers. However, foreign PC makers including HP, Lenovo, Toshiba, Dell, and local ones such as Samsung and LG are following suit. More than 60 kinds of PCs without any OS have been released by those companies so far this year.
PC manufacturers say that those PCs give users an option to install various types of OSs. The Windows OS constituted nearly 93 percent of the market in the past, but Microsoft is in a precarious position, where its operating system is more likely to occupy less than 90 percent of the market.
Despite the options touted by PC sellers, a lack of an OS is, in fact, encouraging the widespread use of pirated versions of windows, and thus creating the problem that getting proper service is impossible. Even though Linux and other operating systems can be installed in new computers, general users have no alternative but to use Windows. Windows 8.1 costs around 160,000 won (US$149), and the price of a computer without an OS is higher than that of a computer with a built-in OS and the separate purchase of Windows 8.1.
In light of this phenomenon in the market, Microsoft is adding programs that support sales when signing a license agreement with PC sellers for its operating system. Nonetheless, the software company says that it cannot change the price of its Windows OS, per se. Therefore, it seems that the licensing fees for Windows OS will continue to be a big burden on PC makers in the future.