They probably thought to themselves that the latter would be the better option. Not only to make them easily affordable to produce and buy, but to retain the same performance to competitors.
After all, SoC is the same ones used in Android phones that were made for gaming.
Yeah I think I spent like close to 300 all in on my Pi5 setup buuutttt depending on how you look at it that is super cheap, like per game or all the "Mini" consoles you would have to buy to get something close to it.
If you own no other devices and can find something that does up to switch for 300 the price makes up for it just for that then again a complete genesis can go for around 150 not including games
It's interesting, you can get up to PSX with a $50 device, but if you want PS2/GC and so on, it's $150 minimum but $200 to be sure, and those devices can already play Switch.