"Marketing made me do it" is so unsatisfying in many respects as an answer, though I fear I have mostly anecdote/speculation to add to the question.

Having used microwaves for many years, anecdotally I will argue that digital interfaces offer significantly higher degrees of precision than dials. Often the dials have worn/fatigued too, meaning that "zero" (minutes/seconds) is no longer at the zero mark on the dial exacerbating the issue further.

This is particularly noticeable when attempting to microwave butter for just a few seconds to soften it. The actual time spent "on" would vary from barely a second to around ten seconds - a significant margin of error where even just one or two seconds too long will turn soft butter into a molten mess!!

Then there in the introduction of automated/pre-set options - for example defrosting diced chicken may use different wattages and times than those used when cooking/reheating soup. Advances in technology to enable these abilities in microwaves now mean that dials are inappropriate UIs for potentially tens or hundreds of selectable options.

"Marketing made me do it" is so unsatisfying in many respects as an answer, though I fear I have mostly anecdote/speculation to add to the question.

Personally, the key addition that digital displays/interfaces add over mechanical dials is precision. While the difference between 2m30s and 2m40s isn't much for a ready meal, if you are looking to soften butter the difference between 3s and 13s is HUGE and will leave a molten mess to clear up!

In addition to the standard imprecision when looking to select a specific point on an incremented scale (on the line vs between the lines vs somewhere around it..), anecdotally the older microwaves I've used have an issue with them not actually stopping at "zero". Following years of manually forcing the dial back to zero, springs/dials/internals have stretched and/or moved out of place leading to the what's on the dial not actually matching what it in supposed to represent.

Once digital microwaves with a keypad to select the time became possible, years of development has led to the introduction of pre-set options for various foods. This seems, in my opinion, to have driven the development of significantly hamstrung UIs.

To summarise the above, I am convinced that analogue/mechanical interfaces are no longer ideal and cannot cope with the additional features built into newer models. Unfortunately, they no longer " do a few things well" and instead have veered into "doing lots of things to a mediocre standard".