It looks like this is basically a 6502 with no Y register and a reduced set of instructions.
Some past discussion of this: http://forum.6502.org/viewtopic.php?f=1&t=2027
Why would you do this? It absolutely can't have made any difference to the cost of the processor in 1998.
Who knows maybe the processor had been designed and produced a long time before that, and that made it super super cheap to throw on a BOM because it was technology from a few years before.
Also likely to use sliiiightly less power, and be even more responsive to interrupts.
The NRE to make the change is at least $100,000 (probably closer to $500,000--but I'm spitballing here). And that is up front cash.
Those changes are really small. So, lets assume a penny saved.
It would take you 10 million chips to make that back.
The total run was 25 million? or so--and nobody expected that.
If the NRE was $500K at a penny saved, you never make it back.
Even at a nickel (which is probably a huge savings), again it would take a 10 million chips to make it back.
Given the oddity that this is, I bet that this was a failed batch of chips that was just enough damaged to be really cheap but not so damaged as to be useless.
It's likely it has been used in all sorts of toys and the like for the last two decades. And it was probably dirt cheap. And probably designed in the early 80s, hence the design decision to go with the 6502 as a base platform.
I thought Sunplus was a bit newer than that (90s), but a quick search reveals that your guess was pretty close:
https://www.sunplus.com/about/milestones.asp
Founded in 1990.
Datasheet for the chip they used:
http://www.ic72.com/pdf_file/-/428557.pdf
Looks like a fairly generic "sound processor" that was most likely used in tons of toys and other consumer electronics. Hell, I wouldn't be surprised if the Furby line wasn't even their biggest contract.
There is no chance that removing Y and its instructions saved 50% die area on a chip with 80K ROM and 128 bytes of RAM. The "savings" is likely due to this being in a 350nm or 500nm process rather than anything else.
Seeing as this is a cheap Chinese fabless company and these things were Chip-on-Board, they had a failure on the Y register and just datasheeted it into compliance. This is little different from the original 6502 which datasheeted the lack of Rotate Right into compliance on the first versions.
If it's cheap enough, nobody cares.
Of course one could go look at the layout of the (NMOS) 6502, which has been fully reverse engineered at this point, to prove or disprove this.
The Y register is WAY smaller than even I expected. It's a tiny vertical strip on the lower left. And the PLA entries are on top, and a couple entries would again be tiny.
Any savings due to omitting Y would be miniscule.
The more I examine it in detail, the more it becomes clear that it's just a bug that got datasheeted.
A prime example is https://en.wikipedia.org/wiki/Intel_80486SX where Intel spent extra money to develop a way of damaging a 486DX so it could be sold as a 486SX at a lower price.