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curl-6 said:

I feel like the Wii would still have succeeded as a more powerful system with a slightly higher cost, as long as it was still reasonably affordable.

The thing is though, it's easy to say this in hindsight, but in 2006 the whole concept was unproven, and if motion controls hadn't exploded the way they did, Nintendo could have been stuck with another failed system, and this time one that was expensive to make and develop for, which could have been disastrous.

They needed to hedge their bets, and making the Wii technically conservative was a prudent move at the time.

That's really all it was. Nintendo didn't want to take the risk of something unproven on an expensive chipset. 

The Wii could have definitely been more powerful, $250 was still quite a bit of money even back then. The GameCube was a massive upgrade over the N64 and was still only $199.99 just a few years earlier. 

The re-used the GameCube chipset because it made the system far, far less risky for Nintendo, if it had flopped they could have moved on to another console. 

Same thing with the DS, if the DS had not taken off they would have moved to make a better than PSP Game Boy Next for sure.