Nintendo does not compete on specs. They rely on the fact that fun is pretty much orthogonal to bleeding edge graphics.
They use that awareness and take advantage of simpler graphics to trade off processing power for features (portability, novelty) and profit (60>=usd games).
From time to time they also remind us that little hardware can do a lot if it's not running Chrome on a trench coat, and instead care is put in optimising things.
This is true. But high specs are a big win anyway if it opens up access to a bigger library of 3rd party games.
That's true, but Nintendo's counter to that is exclusive games, and they have big series like Mario, Zelda, Smash Bros. There's also newer ones that are more niche, but at least for me it's just the game where some new Smash Bros character comes from.
With exclusives games, emulation can be a problem, but many Nintendo games also rely on the novel things on their platform. For instance the Mario Party series has always tried to use something (rumble, mic, touchscreen, controller's shape).
This makes it necessary to get the console, and once you get market share it'll be worth porting and optimising games for an under-powered console (Celeste, Hollow Knight and probably every game runs worse on the switch, but it's playable). I'm not a gamedev, but it seems that nowadays it's easier than ever to port games since in practice there's fewer architectures around.
For a while Nintendo didn't have a competition in handheld market. If you wanted a handheld gaming device you only had Switch.
Now Steam deck easily competes on fun with Nintendo, because a lot of people have massive decades old steam libraries and constant supply of newest and greatest indie games, and quite a lot of power to play fairly modern titles.
This is hard to compete with because Nintendo likes you to pay for games you've already bought on their platform in past, including old NES and SNES roms (which are super embarassing to ask money for imo).
The only drawback of Steam Deck is that it's a fairly big and bulky.
Buying Switch 2 just for a odd once in every 5 years exclusive Zelda game is a pretty hard sell.
I just don’t hear the word orthogonal used in this context enough. Refreshing
This is a pretty important point, and one that I'm mystified that a lot of people seem not to agree with. It doesn't matter if you're playing on a glorified smartphone with thumbsticks if the game is good enough. Moreover, having a selling point of state-of-the-art graphics today will turn into a _disadvantage_ in 5-10 years when newer games look even better; something designed to look good today with "lower quality" graphics is going to hold up better because it already is being compared to stuff taking advantage of every ounce of the latest save greatest hardware.