The same can be said about phones and portable video game systems. It's all ARM CPUs with Imagine GPUs. Android, iOS, Windows Phone 7, Blackberry, webOS, Nintendo GBA/DS/3DS, Sony Vita all use the exact same chips from the same design firms.
The big hardware differentiator is what cost/performance balance you want to strike. Newer architectures with newer manufacturing processes cost more plain and simple. And there is a spectrum of other off the shelf components to round out the package.
There can be some play in getting more out of a design with engineering tricks or getting better components at the same cost with economies of scale. Or you can corner the market by buying out the entire manufacturing capacity of the best components to deny your competitors (or vice versa). But it's pretty much you get what you pay for.
Nintendo builds hardware two to three generations behind to save a lot on costs. Not because it doesn't know how to get something faster and better. The upcoming Wii U is basically an older PowerPC CPU with an older ATI GPU. If Nintendo wanted, it could create a crazy powerful console with a $1000 CPU and dual $600 GPUs that nobody would buy. All it needed to do was tell IBM and ATI what it wanted. It wasn't a matter of engineering that steered them away, but a matter of economics. Which if you remember right worked great in the short term for the Wii. But as everyone already knew wasn't a long term play. Hence the earlier-than-everyone-else release of the Wii U.
If it flops, who cares? They didn't spend huge amounts on loss-leading hardware, and they didn't need to make a huge investment in a cutting edge FPS only to be told it's not as good as Halo.
Apple (along with the Angry Birds developers) stole their lunch, with another cheap game machine, with an even cooler new control system. Eventually, that market will start to mature, and you will need 100 developers to make a good iOS game. And Nintendo won't want to touch that market with a barge pole, because it becomes a winner-takes-all bloodbath with huge entry costs.
The question is, is iOS an existential threat to the gaming market as a whole? If so, Nintendo will lose. If not, Nintendo will come up with some other wacky control system, and build a few fun (but simple) games staring Mario. People will buy it, because they want a bit of a change from their familiar, mature, and eventually boring touch games. Apple won't hurt them this cycle, because they are busy consolidating their monopoly on tables. Apple doesn't want to take over the gaming market - the 3DS was just a piece of collateral damage. Apple wants to sell a boring mature platform (with simple updates to performance, but no fundamental changes), not novelties that will need to be redesigned every 5 years. But the iPad just happens to be new enough to still be a novelty, and thus devastate Nintendo.
It's not about ability, it's a cogent choice to step back and not play into the arms race. They did the exact same thing with the DS, and outsold the (very significantly) more powerful PSP almost 3:1. And a few years earlier, the GameBoy brutalized the Game Gear.
In terms of raw power, the GC was the most powerful console of its generation (or tied with the Xbox). So was the N64. Neither panned out (though neither lost N money either), so Nintendo went into a different direction. And — at least for a time — struck gold.