Generally a product like this is some kind of "waterfall" product.
That is a manufacturer makes 160 GB discs, but a portion of the distribution of Head / Disc combinations just aren't capable of 160. You downgrade to lower track density and lower linear density and it works fine as a smaller capacity drive.
Now it doesn't miss the density point by 50%, but drives are sold at pre-existing popular capacity points (40GB being a popular capacity point for consoles at one time, for example).
When you design for a certain density, you design around the average head and the average disc. There are tails on the manufactured distribution, and being able to make use of the lower end of the distribution rather significantly increases profitability and reduces waste.
Most of these waterfall drives are sold to OEMs because they want a lower capacity point for $5 cheaper, or some ridiculously small amount, because then they can offer a base model and charge a $20 to upgrade for a larger drive, where their actual cost difference is much smaller. And people will still see "only $20" on a ~$1k purchase of an entire computer as a good deal.
It's not that you see 75% bad sectors. Those drives are scrapped or rebuilt with different media because labor and time on a given piece of testing equipment is a primary cost, and it's not worth the time it takes to map out all those defects. Especially because high levels of defects like that make the formatting the drive needs to be able to find tracks a total nightmare.