For sure, the weakeast point of it was the processor, which had to sacrifice too much performance to stay in the thermal budget. I guess the basic design decisions for the 12" MacbBook were made when Intel still seemed to be on track for their 10nm process. But it wasn't the only caveat with its design. It had of course the horrible butterfly keybord which would plague the Apple laptops for years and 12" is the absolute minimum screen size for doing work.

I think Apple has another laptop design < 13" coming, that could be 12". The ARM processors pretty much solve the power/performance problem. The keyboard could actually be the biggest hurdle, as it increases the body thickness. But the keyboard of the new M2 Air is just wonderful, well worth whatever it adds to the device thickness. I wouldn't even be surprised, if they don't make an ultra-thin 12" MacBook but rather a 12" MB Pro, which might be slightly thicker than the Air.