A nit: Hardware isn't just industrial design. Apple manages to squeeze a lot more performance out of the same components as others, because they do design in an integrated, interdependent way, rather than modular. This gives less flexibility to customize/mix-and-swap, but better performance (for whatever you want to optimize: speed, weight, size, power consumption etc). This was extremely important in the early days of the iPhone, but now that components have improved so dramatically, we are nearing the point where there's performance to spare, and it needn't be optimized.
The upshot is that "iOS on an Android" with the
same specs
wouldn't have performed as well. It would have been less smooth, less responsive etc. So that, at least
then, hardware was crucial for the experience.
The same was true for the iPod and especially Woz's Apple computer. It's still true for the iPad. I believe it will be true for Apple's next product category, because (hopefully) they'll continue to move to the edge of what is possible - where optimization is absolutely essential to be the first to get over that edge.
tl;dr hardware matters.