The SNES can only render 256 simultaneous colours. The TG-16 could do twice that at 512. Its video processor was also full 16-bit.
I’m not sure where you’re getting that the video was the weakness of the TG-16. At the time, that was the Turbografx’s whole claim to fame in that it was superior graphically to the SNES.
Source: Old enough to remember the commercials and bought both consoles to compare like nerds did back then
The sprites look really good, but the single background layer makes things look flat compared to the SNES / Genesis. Devs started working around that by updating some of the background tiles on each frame or using some of the sprites.
The SNES also could do layer blending effects. So while all of the input data could only be 256 colours, the PPU was spitting out a high colour signal after the effects were applied.
Hudson was apparently a legendary company. If you look at their Japanese Wikipedia page, it’s filled with "heroic tales" that almost sound like jokes.
https://ja.wikipedia.org/wiki/PC%E3%82%A8%E3%83%B3%E3%82%B8%...
The CPU was conceived by Hudson engineers who, despite their success in the NES business, felt they had hit the hardware's limits. Interestingly, they initially had no business plan. They were simply "chasing a dream" and supposedly had "no real intention of selling it," which led most semiconductor manufacturers to reject their pitch.
They managed to scrape together a few thousand samples, and by pure chance, NEC—a dominant PC manufacturer in Japan at the time—was looking to enter the console market. This lucky alignment of interests is what gave birth to the PC Engine.
While this story sounds reckless, it was only possible because Japan was in the midst of the real estate bubble, and capital was overflowing.
Once the bubble burst in the 90s, Japan entered a long recession. After a few major bank failures, Hudson’s funding dried up. They were eventually absorbed by Konami, and today, even the Hudson name is gone. It’s a real shame.
The deal-breaker was Sharp’s deep relationship with Nintendo at the time. Apparently, developing a console with Hudson’s CPU was seen as something that would have jeopardized their partnership with Nintendo.
What Sharp was working on back then was the "C1 NES TV"—basically a NES-integrated television. You could think of it as the NES era's version of the iMac. It has a bit of a comical look that always makes me smile.
https://ja.wikipedia.org/wiki/%E3%83%95%E3%82%A1%E3%83%9F%E3...
Where the PC Engine ends up weaker is in the video processor. That generation of consoles was able to do more with the video hardware than previous generations (like the NES and Master System) due to faster RAM becoming available. The PC Engine used the additional bandwidth to make it possible for the CPU to access video memory while the screen is being drawn, while the SNES kept the restriction that you can only access video memory during vblank and instead used the additional bandwidth for more background layers. Being able to access video memory all the time is definitely a useful feature, but the result is that PC Engine games often look more flat than SNES games.