Microsoft partnered with Intel, ATI (now AMD) and Nvidia on Xbox's hardware. That's quite a lot of expertise to get hardware into a box, which consumers had been doing themselves since the late 1980s. And you're forgetting quite a few Microsoft hardware products over the years (which is fair enough because half I had not heard of!) but remember the
Microsoft cordless phone,
SideWinder game controllers.
Z-80 co-processor cards for Apple II,
ActiMates (yeah.. WTF),
DSS80.
Importantly, Microsoft had the three biggest PC components hardware designs as partners and had a huge amount of experience with products where the ergonomics were incredibly important, e.g. keyboards, mice and game controllers.
Two different companies are going to bring different things to their products, but it's not like Microsoft was three high school kids working out of a garage. They were (and still are) one of the biggest technology companies in the world.
I already noted the game controllers, keyboards and mice.
Neither AMD, Intel, nor NV had any experience with consumer electronics for the living room or pretty much anything that didn't involve a business office, data center, or PC room. The big OEM PC makers all laughed at MS and declined to take part in attempting to fit a PC into something as small as a living room console. Not a bad thing either as none of them had much experience with non-PC hardware, almost all of which were some shade of large beige, grey, or black boxes at the time.
As the series noted, because of that MS basically went it alone in trying to get a PC into something as small as a gaming console that wouldn't look completely out of place in the living room. Remember, this was also before SFF PCs were even a thing. Gaming laptops didn't even exist really. Alienware didn't introduce one capable of gaming until 2002-2003 (but a gaming , after the Xbox was already on the market.
Basically non of MS's partners at the time had any expertise with getting something as powerful as a PC with a HDD into a living room friendly console form factor. The aforementioned Alienware PC builders were still making some shade of large grey, beige or black gaming PCs that were still in the standard boxy PC cases. Their experimentation with the look of the casing didn't even start until sometime around 2002. There were some small business oriented PCs at the time, but due to the size, they were all pretty anemic (usually low speed Celerons or the like because of issues with cooling a more powerful CPU in those cases) and none were capable of gaming, because, how do you fit a graphics card that was basically the size of the business PC into that case?
If MS wanted to have a large boxy PC in the livingroom, then yes, they had plenty of partners they could lean on. If they wanted something that a large number of consumers would actually want in the living room? Well, that was ground they would have to break themselves.
Sony? They had decades (about half a century) of consumer experience in the living room and making products that would fit in a living room by the time they made their first gaming console. They had years of experience working with companies whose expertise was gaming consoles in the living room.
The electronics experience that Sony had (especially in the living room or any other room which wasn't a business office, data center or PC room) was leagues above what MS or their partners had.
Regards,
SB