They were.
The reason PPC "fell behind" (for the markets Apple target, like laptops) is that IBM and Motorola, who were largely responsible for the PPC architecture were not interested in mobile as it was a tiny segment of the market. They continued (and still do) to build PPC for servers, which wouldn't fit in mobile computers like Apple wanted to build.
IBM wasn’t. Motorola was so interested in mobile they were bypassing laptops and focusing on embedded chips, including PowerPC derived designs at one point. Only to lose out to ARM-based designs in the end. Go figure.
I honestly don't believe that, it's just the history revisioning. "We could, we just didn't wanna" is loser talk to save face.
We shouldn't forget they did the Wii, XBOX and PS3 chips around this time frame too. IBM had a lot of consumer chips on the go but weren't able to deliver. Remember Steve Jobs promising us 3GHz G5's? - They told him they would be able to deliver that, never happened. That's a failure to execute not a decision not to provide it, he never would have said it if they hadn't promised it.
And they went all in on the custom Cell processor with Sony and Toshiba. They clearly had the will to do special projects. That chip was PowerPC based and could have superseded the G5 to be honest, sure the SPE design made it complicated to program for but it had potential in later iterations or even Apple could have joined that alliance and been involved in the development process to get a custom version with more PPE's which is exactly what Microsoft did when they wanted a processor for the XBOX 360 (IBM took the PPE design from Cell, tripled it up and gave it to Microsoft in a custom design).
IBM in my eyes for sure couldn't execute on a competitive product. It's also important to realise that the Conroe architecture from Intel was just way too good. It didn't just eclipse IBM's G5 and their PowerPC range entirely across all segments (including servers) it also decimated AMD and it has taken them just over a decade to recover.
The PPE wasn’t really a successor to the G5. They were PPC970 variants themselves, which included much more limited OoO capabilities compared to the PPC970 Apple used. The ask of customizing an existing design is different than asking for a truly new design.
I wish could find a source, but at the time, I was thinking that Toshiba’s contributions to Cell were the SPEs, but I could be wrong.
But honestly, with the market pushing towards laptops, the PPC970 variants that went into consoles wouldn’t have done much of anything for Apple. They needed a new design for laptops that simply wasn’t coming, not tweaked versions that were in ways side-grades of the chips they already had.
While you're right about lack of profit in console chips, but you're wrong about NVIDIA.
NVIDIA is still in the console market, they're powering the Nintendo Switch with the Tegra. Before the Switch was released, NVIDIA touted their new relationship with Nintendo will last 20 years. Seeing how the Switch has done well, plus the Shield tablet has been discontinued, sounds like Nintendo picked the right company for their hardware. NVIDIA has all the entire system of the console, they're not sharing it with Intel (original Xbox) or IBM this time.
As for the future versions of the Switch, I've heard rumors it's a different NVIDIA SOC and APU they'll be running and not the Tegra and moving to "Volta." The Switch Pro isn't coming out, so who knows what NVIDIA and Nintendo are working on for the next Switch.
I’m not sure what you mean by Volta replacing Tegra here. Volta is not an SoC, but a GPU architecture. The SoC mentioned in rumors was called Xavier (which includes a Volta derived GPU), which itself is still considered a Tegra SoC. One that’s been available for a couple years now.
The problem I see is that after Xavier, the SoCs that Nvidia have announced are chips aimed at robotics and autonomous vehicles. So Nintendo is going to be increasingly dependent on chips where they are the only customer (customized derivative designs), most likely. They might not have an issue with this, as it’s not new to them, they’ve used these sort of one-off PPC variants for the GameCube, Wii and WiiU. But I do wonder what would stop them from shopping around for another ARM provider. Nvidia has yet to do anything custom for Nintendo, and seem less interested in the console/set-top-box space these days compared to when they were trying to make the Shield work. I hope I’m wrong, but if I was Nintendo, I would be somewhat wary of Nvidia right now.