Because that's literally how they were marketed and hyped for a very long time.

Now? No one knows or can tell you what they are for (except leaf components and HTML Web Components maybe)

are they supposed to be more or less granular?

Less granular.

Somewhere between "React components" and "Microfrontends."

They can still be small, but often you will want many fewer than React components.

anything can be granular, but doing that in web component is very clunky, it's like writing java with a class and a code file for every tiny thing.