Physical buttons are complex to make and expensive. And bulky; when not playing a game you still have to use up space on the phone for them.
Not that I don't agree with you --- I do; gaming on phones is a miserable experience. You do get game controllers for phones, but they're frequently awful and game designers can't assume that people have them so they have to design for playing on the screen anyway.
I'd rather just game on my 3DS or PS Vita instead - phone battery life is still miserable with intense games, and performance is also questionable.
Phones are just not built to be a good gaming platform as is, and I am not convinced they will be comparable in experience for at least another decade, if not longer. The technology isn't optimal yet.
Not that I don't agree with you --- I do; gaming on phones is a miserable experience. You do get game controllers for phones, but they're frequently awful and game designers can't assume that people have them so they have to design for playing on the screen anyway.
I'd love to see a proper solution for this.