I apologize for asking what may seem to you as a basic question. Why a custom hardware device instead of an application that does encryption locally on the customer's device of choice?
HSMs are very good because the key isn't stored in a way that allows an attacker to get it. HSMs have authentication systems, so you can ensure that only the user can use the decryption key (but they can never get the actual key). Of course, you can misuse them to create proprietary jails for users, but they can be very good for device security.
the hardware is "trusted", the customer's device may not be.
It's not completely custom - trusted elements have independent evaluations (FIPS / EAL). We think that a combination of local and centralized elements provides best security.