I can't for the life of me figure out how this solving any problems. All I see is this hogging resources that could be used to produce PS5s.
Those resources aren't bounding anything PS5 needs. PS5 need modern processes, while PS4 still uses the old 16nm process (or was it 14nm ...). There is enough headroom to produce a bit more of these processes. The newer processes are the problem. There are just to many products that need those. That's why e.g. nvidia returned with RTX2060 cards on the market, because they can be produced. Memory is also not the problem. The demand is there so they just want to serve the demand and earn some money.
Sony produces as many consoles as they have planned (those contracts are made for years in advance). They just currently have the problem that they can't produce more (more expensive short term contracts, but there are no resources for those to be made).
"We believe in generation
s" is still valid. They just believe in 2 generations now
And as I state for years now, the current gen is not that different from the last gen. They are just faster and have faster storage. But games should still get "downgraded" quite easy (you can do everything on the GPU just in much lower resolution/precision/...), at least if they were planned to run at 60fps on the current gen. If they were planned to run at 30fps ... the cpu can get into the way (without further downgrades to e.g. physics, npc counts, ....). So at least as long as we get cross-gen titles, we get 60fps titles