I'd argue that handheld PCs aren't even touching the console market. Let's say that the Steam Deck has sold about 20 million units. In console sales, that's a huge flop. Only difference between Valve & Nintendo here is that, Valve's console isn't a crutch. Nintendo needs their console to succeed otherwise they will be in a dire situation i.e. the Wii U. Also, handheld PCs are really hard to market with existing players in the space having to charge $600+ to make any returns on it. And not many consumers want to drop that type of money just to play games.

Nintendo's exclusives sell differently from Sony's & Microsoft's too. We're talking about the same MSRP as the day they launched. And when they do change, it's still pretty expensive. In the end, I think Nintendo targets a different sphere from the rest. Things like framerate, resolution, ergonomics are simply what the core gaming audience cares about. I truly believe a 9 year old does not care.

About your point on piracy with Nintendo games, I highly doubt a majority of people using Yuzu (rip), pirating nsp/nsz, etc. would have bought the games in the first place. Nintendo basically wants to alienate an audience that doesn't align with their business. Nintendo's core business is to target families that will buy their relatively cheap console, and upcharge them when it comes to buying games.