Weak hardware can work quite well with optimized and non-bloated software (which doesn't constantly phone home). For example, maps and Youtube work smoothly on Pinephone with SXMo. See also: https://puri.sm/posts/the-danger-of-focusing-on-specs/.

I hope so, but I just don't understand what exactly causes such massive price difference.

Is it because this kind of phones are a very niche product so they can't benefit from the economy of scale?

Maybe android phone manufacturers can get better deals from chip manufacturers because they buy chips in large quantities?