It's not primarily about using defective chips (but that's a nice side effect). As a process becomes mature, yield rates become very high and there wouldn't be enough defective chips to meet demand for a lower tier, so good chips are binned into those tiers anyway.
The primary purpose is market segmentation: extracting value from customers who would pay more while not giving up sales to more price sensitive clients who nevertheless pay more than the marginal cost of production.
That makes sense, thanks. I wonder if it would be possible to de-bin one of the lower end ones, assuming it is a binned version of a fully functional higher tier chip. Or perhaps they completely destroy the offlined cores/features.
Either they just accept the fluctuations in order to maximize output of high end chips, or they would have to cripple fully functional ones to maintain a predictable supply. Interesting business.