Personalization. People love to express themselves with different cases and having the device even a several mm thicker would make most of the customers look at in disgust, because then with the personalized cases it would by huge. And trust me, outside of tech community, no one wants thick phones.

I'd much rather an external 3rd party case. When my $20 case gets worn or damaged I can spend $20 on a new one.

If that was built into the phone it would be much more expensive to replace, and I'd end up just putting another, slightly bigger $20 case around it to prevent that from happening.