Yeah, the market for those handhelds seems to be people who either specifically want Windows or want better specs (or think they want that), but don't mind the trade-offs.

No, MSI or ASUS or really any other hardware company (that primarily sells hardware) makes money from selling hardware. Valve main source of income is their steam service, not the deck. For any deck they sold, they could make a loss but they gain revenue by a first time gamer. Much like how console can be sold at a loss but making the profit from the game they sold. The primary difference between traditional console and steam deck is that any hardware competitor to steam deck is still a win for valve since they also mostly profit from sales on their steam service. Thus my point, any hardware company is not valve primary rival since if a consumer chose steam deck, valve wins, but if they chose the competitor, valve wins too. Epic, Ubisoft, and EA or whoever else that tries to provide the same service like valve should be their primary competitor.

Edit: my point being, the deck doesn't need to be faster, or more power efficient, or more ergonomic. They just need to popularize the form factor. The fact that valve makes the deck so awesome on release, only to be overtaken by another hardware is not a loss for valve.