OP title says "as a concept". In that regard, yeah, I like Smithing. And I hope it gets expanded to include armor. I like it enough that I do pursue Smithing in my playthroughs, even with all the system's warts. That said, yeah, those warts are real.
The main faults with Smithing:
- Completely random component unlocks. I craft a 1H weapon...why would I learn an axe head from that? For that matter, if I craft my first Tier I 1H sword as a Level 1 Smith, it seems likewise illogical that I could stumble across the secrets of a Tier 5 Thamaskene Steel blade in the process.
- Difficulty restraints (or lack thereof). If I'm lucky on the RNG, I might unlock a very powerful 2H sword or polearm head and be able to create a crazy high-damage (and therefore high-$$$) weapon at very low Smithing skill. The resultant stat penalties are laughably insignificant as a mitigating factor. The whole "skill-vs-difficulty" mechanic needs to be re-worked. (to be fair, RNG can work the other way too...I can also work a long time on Smithing and be far into the game without ever unlocking one of those relatively-few "pinata" blades. lol, that's kinda happening right now in current playthrough).
- Over-emphasis on damage in determining weapon value and XP. Some of those high-damage/value/XP blades are only mid-tier and require mid/low-end materials. For example, the 2H sword Falchion blades are Tier III/IV and are made of Wrought Iron. With only one "batch" of Stamina and a few smelted Looter-level materials, I can make three swords that bankrupt three cities (and have earned somewhere around 10-20 XP and a dozen or so component unlocks along the way).
Solutions:
- "Organize" component unlocks. Link unlocks to tier/type of weapon being crafted. For example, crafting a Tier 2 Axe head would unlock a Tier 3 or perhaps Tier 4 Axe head (but not a Tier 5, and definitely not a Sword or other blade of any tier).
- Make weapon difficulty matter. Smithing a weapon of higher difficulty than skill should either be way more heavily penalized (driving down the value of the crafted weapon), or even prevented entirely. Or combination of both. For example: I'm Skill 100. Obviously any weapon at or below 100 would be fine. A weapon of say, 100-110 difficulty could probably incur the relatively minor stat nerfs we have now. But anything higher than 110 should have increasingly higher penalties, like, 5x or even 10x heavier than what we currently get. And probably around 140-ish or so, the weapon should not be permitted to craft at all. Just throwing out hypothetical numbers to illustrate the idea.
- De-emphasize weapon damage. Link weapon value/XP more heavily to its components' tiers. The highest $$$/XP should come from Tier 5 components, period. I think there's already some element of this in the system, but weapon damage heavily skews the outcome. Which is the major reason why it's 2H swords/polearms (and javelins, from what I read) that are currrently the "go-to" weapons, and 1H weapons are marginalized. (Note: I'm NOT advocating that therefore some high-damage weapons could/should be cheap. Those 100+ damage blades which produce high $$$/XP need to just be moved into Tier 5).
I don't think I'm saying anything that hasn't already been mentioned multiple times this thread, so...
TL;DR What everybody else said, lol.