It's because going to s35 gives the OPTION of EITHER using a prime or short range zoom, which can be quite fast and give shallow depth of field, *OR* using a long range zoom lens. Otherwise, you're quite right - if you only ever used a lens like this you may as well stick to 2/3" and a faster lens.What I find interesting about this lens is it is a signifier of "the death of 2/3"
Shooting at 8 or so surely gives a similar look to shooting a faster zoom on 2/3 - so why change to S35 then shoot 'stopped down'?
If you wanted a lens like this - but f2 - it would be massive, heavy, and impractical for much use. It's worth realising that optically the front element diameter is the ONLY real defining factor in terms of depth of field and low light abilities for a given sensor resolution and technology - make the sensor bigger and you get a higher ISO/smaller f stop, make it smaller and get a lower ISO/bigger f stop. The only way to take advantage of the higher ISO figures associated with larger sensors to get better low light performance is to make the front element bigger. Otherwise you'll always be robbing the ISO Peter to pay the aperture Paul!
There are a couple of factors. One is the photosite size, but the other is engineering to align the R,G,B sensors in precise alignment through the ice block. Each corresponding R,G,B photosite has to be in exactly the same optical position or you'll get registration errors. (Which those old enough to remember tube cameras may remember with nostalgia....It has to be a realisation that 4k or suchlike is hard to jam into 2/3 and that 'broadcast' (read live sport) will be coming from S35 soon.
No one is going to make that investment unless they are 'in' S35 for the next decade.