I was watching clips of LinusTechTips' podcast, and he said that speaking to people who he trusts in the mobile phone space, that SD removal was primarily because SD flash is worse than the onboard stuff and they lose more customers who complain/think the phone is bad because of the SD card being worse, than customers who wouldn't buy the phone in the first place because it lacked it.

Personally, I think it's a little of both. It probably helps that less customers complain about the SD card not working, but being able charge an arm and leg for extra storage is icing on the cake.