Depends on the nature of the failure. This is super common in CPUs for example. The absolutely perfect ones go in the top quality bin, those are your i9 and Ryzen 9 CPUs. Ones that are functionally fine, but a bit unstable at the higher clock speeds end up in the next lower quality bin, so something like an i7 or a Ryzen 7. Then you have ones that maybe have a failed core or two, those ones have the failed cores fused off and go in the next lower bin with lower core counts. Etc.

In the case of a flash memory chip as long as it isn't corrupting data at a certain speed I'd expect it to be binned down to a lower quality bin. Assuming whoever buys that chip runs it at the clock speed the binning says to run it at it should be fine. Where you'd run into problems is if whoever buys it ignores what they were told and runs it at the full speed, in which case you're going to end up with corrupted data.

Likewise other things that could lead to a usable but lower quality chip is if certain areas of memory were bad. As long as you disable those failed memory regions and sell it as a lower capacity chip that's also fine. Once again though if the buyer re-enables the failed memory regions then that's a problem.