Since this is in Off Topic I guess it's a rhetorical question but anyway: the big gaming market crash in the 80s > make everything look "serious" and more like a home PC = big, bulky, ugly instead of small and "cute". Just look at NES vs. Famicom. Btw, I happened to own a TurboGrafx until I sold it a few years ago. Ugly indeed and even more so if you take the back cover off. Bad design...
Gaming mags of the era mentioned that the size increase was due in part to complying with RF interference. Here's a quote direct from the Mar/April 1989 issue of Video Games & Computer Entertainment in their PC Engine sneak peek article: "While the game system isn't in the US now, sources tell us that we may see it sometime during the coming summer. The PC Engine shown in the photos is the Japanese versions--a very compact, lightweight unit. The US version will definitely be larger to comply with certain federal standards in the prevention of RF (radio frequency) interference."
ASSEMbler said in one of his PCE articles that the Japanese manufacturers thought that Americans wanted BIG HUGE console dimensions to imply a higher level of HECK YEAHR awesome.
Americans like big cars, then let's give them big consoles! The Turbographx failed anyway, they're a waste, I'd get a PC Engine anywhen before a PAL one. And the Mega Drive was quite big too but it was a giganormous success (in PAL at least).
Just look at the NES. Huge, ugly (charming though) and sold like virgin hookers. The TurboGrafx did not which prooves that it's still all about the games.
Simple. It is the "Americans have large penises and we (Japanese) have very small ones" marketing campaign. Take into consideration South Park's episode when it made fun of the Pokemon fad and how it was a ploy for the Japanese to invade USA. Didn't someone open up a TG16 and found that there was no RF shielding throughout the entire case - only over the PCB, just like the JP version?
I think aside from the RF shielding theory, I have two other possible explanations. 1. Perhaps the FCC or some other regulatory group back in those days really did require that computing devices be a certain size. Take the Atari 2600 for example...open one up (aside from the original 1977 heavy sixer which really did have huge heavy metal shielding) and you'll find the innards to be minimal in relation to the outer casing. 2. Perhaps consumer electronics manufacturers wanted to follow a certain size guideline with regards to aesthetics and modular design to blend into the average consumer's A/V setup. In other words, people already owned flat, relatively box VHS players, laserdisc units, cable boxes, etc...it's only natural that gaming units also followed along those lines from a design standpoint. The PC Engine size format would have looked so out of place if it had been released in its small form factor for the US market. The consoles from the 70's had a design and form factor that blended in well with other components from the 70's (ie: woodgrain trim, chrome switches, etc) whilst the 80's A/V products all took on slightly more "high tech" or zanier designs which were commonplace for the era.
It could have to do with a "bigger is better" ideal, the same thing that caused the Atari Lynx to be as big as it was. It could have been much smaller, says RJ Mical: (link)