I'd say because Apple had a vision over the user experience of the product. They do the product according to their vision and then verify the vision with consumer testing. There are loads of mobile devices with hardware keyboard and loads without them. Whichever you select, people will complain.

The fact that there's no hardware keyboard probably cuts out a certain percentage of potential customers, but it's rare for any single feature to have a significant cut in total sales, it's more about the whole package. People are willing to have "less than ideal" - of course that's a very subjective statement - features in certain areas if the total offering is very tempting.