The cost savings of downloads are just too ridiculously huge to really think about going back to manufacturing circuit boards. Beyond the marginal circuit board cost, there's a huge physical goods infrastructure that just doesn't have to exist when you go with downloads. Servers are a good bit easier to manage than manufacturing plants and shipping infrastructure.
Yah, but what if physical goods gave you that edge over your competition? That neat wow cool factor that all of the other 'download' devices don't get because they can't change?
"Neat, wow, cool" is insignificant compared to the advantages of digital distribution. Done right (see: valve, humble bundle, even xbox live to some extent) it enables you to slash incremental delivery overhead for each copy of a game, which means that the purchase price can become almost entirely profit margin. Which further means that you can cut prices down to levels that will massively increase the volume of sales and increase your total profits, especially on older titles.
Higher profit margins, lower operating costs, and the ability to massively extend the profitability window of a given game (from only a few months to a year to more than a decade) make digital distribution extremely advantageous for anyone who can take advantage of it properly.
But in a download-only world, physical goods would be perceived as rather inconvenient to obtain compared to the norm, somewhat negating the effect. (In PC gaming, this is arguably already true.)
