Probably a bit of both.  Sony going $500 and $600 on the ps3 (my prices could be slightly off), while Nintendo went $250 had to help a lot.  

I am not sure actually. I think it always made sense for their GameBoy and DS lines, affordability and decent battery life were more important then.
With their home consoles, I think theyopted out too early, it was a massive gamble for the Wii, luckily for them, people got really excited about the motion control thing. Had that not gotten so much excitement, Nintendo would have killed themselves with the weak hardware, as they would have had to sell the system on their core franchises only. Today you can still get a solid amount of cross-platform support with hardware a full generation weaker than the competitors, especially because of indies. In 2006 that just wasn’t possible. The gamble mostly paid off, because people initially were hyped about the wiimote, but Nintendo payed the price for the weak hardware in the Wii’s twilight years and especially with the Wii U.

From Switch onwards the strategy is the right one. There is very little to gain by competing with Sony and Microsoft on hardware specs.

For the bolded sentence, absolutely. Sony made Nintendo and Microsoft's marketing campaign, just like they did the exact same for the PS4 a generation later. But again, a $350-400* Wii with Wii Sports, Twilight Princess HD and power similar to a 360 (keep in mind that this is a year after the 360 launched) still looks more attractive than a PS3 that you'll have to get a second job for.

*I meant to say $350-400 in my earlier post, not $300-400.

Little to gain eh? What about The Witcher 4? GTA 6? COD? Battlefield? but yeah very little to gain. 

Weaker power means cheaper software development costs.  Nintendo makes a living on selling Mario, Zelda, Fire Emblem, Metroid, Pokemon and Animal Crossing.  Keep development costs down via weaker hardware is worth far more than having those titles.  And to be fair, those might come anyway.  Games are scalable as crap.  People can game on a 2050 up to a 5090...  games scale.  Porting isn't what it used to be.

edit

speculation, but GTA6 minimum is supposed to be a gtx 1660, the Switch 2 fairs well against a gtx 1660.  Sure GTA 6 on the Switch 2 will be 30 fps and low resolution, reduction in crowd density + draw distance.  But it is doable.  Nobody is making games that aren't compatible with weaker hardware.  Steam is loaded with stuff like 2050, 3050, etc.    

Forbidden West on the PC can run with a 1650..  the Switch 2 is well beyond a 1650.  I am not sure why people think porting to the Switch 2 is magic.  Games are designed to be scalable.  

I don't agree with this. I don't think people realise just how much money Sony makes off of third party software and MTX's. It also puts a burden on Nintendo to keep making games which is expensive, whereas Sony can just sit back, do nothing and let their platform be the first choice for all third party developers. At this point Sony could literally close all of their first party studios and do just fine, and surely that's cheaper and easier than being forced to keep making games to keep your platform alive. 

The Switch 2 isn't a "we opted out of the graphics race" product at all. It's a premium priced product with impressive visual capability and unlike the Wii, DS, 3DS, or Wii U it can even run the modern current gen 3rd party games (Wii U came out just before the PS4 did and wouldn't have been able to run PS4 games) while still being portable. 

So right off the bat, the Switch 2 isn't a low end product, that's the thing I dislike about these types of conversations there's way too many uninformed takes and broad generalizations. Like the Switch 2 is definitely not the same kind of product as the Wii or DS were.

The Switch was kind of a "in limbo" product, it wasn't as good as the Switch 2 is for today graphically when it launched. But they had to choose an off the shelf part (Tegra X1) presumably for time reasons. The Tegra T239 in the Switch 2 is much more custom with Nintendo's involvement and Nvidia has gotten better at making mobile chips on top of that.

As for the Wii-DS-3DS-Wii U era ... well that kinda speaks for itself. Wii and DS were huge successes but Nintendo could not sustain that audience and the Wii U flopped, while the 3DS suffered a massive drop in install base because a lot of casuals bailed out to iOS/Android gaming. I don't think a lot of that casual crowd even understood fully the concept of video game generations. They didn't "get" that they had to buy a new Wii and figured they already had one, why would they buy another one? It was kind of like marrying someone and then finding out afterwards one person really wants kids and the other doesn't want kids (Nintendo's "love affair" with the casual audience). I think Nintendo was shocked at how easily that audience just dumped them. 

The problem always really was Microsoft XBox. Microsoft's wasted everyone's fucking time, including their own, spent a ton of money to get nowhere in the game market and they overcrowded the traditional home console market to make it not attractive to Nintendo any longer. Nintendo would have had to have kept inventing new gimmicks to stay in the home console business model that the Wii established and it wouldn't have worked long term, it was a single boost that was already starting to fizzle out by 2010 or so.

Now the irony is with XBox basically fading out of the business, there actually is probably a spot for a traditional Nintendo console if they really wanted to do that at some point. It would have to share the Switch 2 library as bespoke libraries are today basically impossible due to how long games take to develop. But Nintendo could do that, they wouldn't even need it to sell some massive number because it has a shared library, if it even sells 20 million units it would be considered a gravy bonus on top of the other Switch 2 models.

Switch 2 will likely have Witcher 4, COD is coming and even coming in the next few months apparently, and probably even Battlefield now too that EA has been sold to a Saudi conglomerate (first thing they will do is put all EA games on whatever viable platforms there are, so old EA is basically dead). 

GTA6 is really the only question market at this point. 

Switch 2 has already gained from what we know Monster Hunter mainline, Final Fantasy mainline, Resident Evil mainline, MS IP like Indiana Jones and Halo and Starfield are apparently coming and the Switch 1 had Witcher already. 

There's not actually that many huge IP even left that won't be on the Switch 2 platform. This is nothing at all like the Wii or DS or 3DS or Wii U and already a large improvement from the Switch 1. 

Maybe, but with stuff like MK8, amiibos and the Mario movie...  it ain't like Nintendo is struggling.  Their franchises are worth a fortune.

Edit

The biggest barrier for the switch 2 ports is storage space, not the ability run cut back versions.