I just got done (mostly) reassembling a wardrobe. It's a bit more wobbly around the edges. I'm not sure if it's because I didn't put the shelves back in the exact spots (wasn't thinking and didn't label them during disassembly) or if it's something else, but once we decide it's not good enough for the room upstairs where it now lives, it's getting put in the dumpster.
Solid wood is expensive, in a lot of the world.
And for furniture, you can't do a good job with cheap wood - if it twists or bows the doors won't close right, or the drawer will be tight. Need a hole in a particular position, but there's a knot? You're going to have a bad time. Wood with loads of knots doesn't look great. And of course, some types of wood cost a lot more than others.
Chipboard with veneer, though? It's super cheap. You can have any colour you like. It machines consistently, with no knots or checks like that. The response to temperature and humidity is even and consistent. If you need more strength, you can just order thicker boards. Sure, you can't leave it outside in the rain - but so what?
The main downside to flat pack furniture is a lot of people don't manage to assemble it right. A nightstand will end up in an awful state if the person who assembled it forgot to nail the back on properly, or used a short screw where a long screw was called for, or put a part in the wrong way around.
Wood veneer over cheaper materials has been common for over a century at this point though.