Unless said device provides a similar gaming experience at a far lower price. Without buying used hardware it isn't possible to make a PC that offers a similar gaming experience to the XBO-S at a similar price.
For Microsoft it doesn't matter if the margins on the console hardware is razor thin as long as they get the revenue cut from any software that runs on said console. Said console will be custom, but could be using off the shelf PC components or semi-custom designs (SOC using off the shelf PC CPU/GPU blocks, for example). Said console would be nothing more than Windows in a box. Not-user upgradable for the most part...just like most notebook PCs or Intel NUC style PCs.
It'd be a PC in everything but name and the fact that it's using a custom Console UI, with any Windows components that aren't needed not included (system management services, WOW, Explorer, etc.), and running a closed garden.
People would buy it because it'd give the gaming experience of a PC that costs twice as much or more. With the convenience of a console. The drawback being that it'd be limited to a console interface and access to applications outside of gaming being limited to what is in the Microsoft Store.
Basically what Microsoft have been working to transition the XBO into. Except that custom hardware will only exist to reduce the cost rather than introducing features that do not exist for Windows PCs.
All, IMO, of course.
Regards,
SB