LEDs are like 15% efficient and power supplies are >95%. They just need to be separated slightly so the LEDs aren't heating the power supply. Most recessed LED lighting now has a separate junction box with the power supply.
I think the biggest problem is that many cheap power supplies cycle at lower frequencies that cause flickering which is perceptible subconsciously. A modern switchmode power supply might operate in the 50-500khz range which will not cause perceivable flickers.
I'd say it's a very bad choice for a bedroom or living room light, but I have nothing against it for the outdoor lights, signage and a bunch of other applications where cost is king.
Just don’t use these devices, please.
But then, a wise entrepreneur would recognize paying extra to have non-flickering signage would attract some customers.
Flickering lights can induce migraines in susceptible people, so literally, saving a penny here actively drives away business.