It may be that in some cases the package is an advantage but I'm not sure that it is especially cheap - is it any cheaper than a STM32F100CB, ARM Cortex, 128k Flash, 48 pin with many nice peripherals on board including DAC, 12 bit ADC, CRC generator, DMA, etc etc.
atmel has been making 128K 8bit mcu's for years, they do the mega128 and a low power version, the chip is so easy to use, i did most of my work at uni on this chip, it only has a 10 bit adc though and is getting on a bit now....
i still think atmel is miles ahead of microchip in the 8bit market, just a pity not in market share or cost.......microchip have always dominated there, lol
we use both microchip and atmel MCU's here, our current product development is basied around the PIC32 family, the new architecture is easy to learn and very powerful, some of the internal core operates more like a desktop PC core, with pipelined fetching ect, all of this with full C compatability, unlike other microchip products, lol.....