I don't think a Steamdeck variant of the PS5 makes much sense since none of the games will be optimised for weaker hardware.
That said, I've read some interesting thoughts that this device is most likely just an alternate controller (Dualsense, DS Edge, and then this) with a screen.
Like, if this is going to be pushed by Sony as a controller accessory, then a lot of the talk around the limited info we have on this device is somewhat irrelevant since this isn't a handheld but a controller.
"Wonders what the competition will think of it" implies something much bigger or more interesting than that. If it doesn't run PS5 games (or at least PS4 games) natively in lower settings, then I can't see how it will draw the attention of the competition.
It may be something none of us guessed correctly.