AMD FSR2 works ok but still notably inferior to DLSS. For budget/mid-range that's ok, but at the high end that's a real problem, because high end buyer wants high end results. Particularly as hardware starts steamrolling previous games it becomes a snowball effect with DLSS being the only way to actually get better quality from the AA (and therefore overall image quality), I'm thinking of CP2077 for myself because even with the native TAA there's a shimmer issues that's very aparent (and ofc worse with FSR2) but which is the most alleviated with DLSS. Nevermind also the DLAA support in other games. Ymmv depending on the game but it's still a big selling point and a definite advantage. And if not that, then certainly the wider support it enjoys, despite it being a closed solution. Money talks after all, and it's in more games than AMD's with its "well, here it is, go implement it if you want" approach. So if you ever want to play demanding titles which make even current cards falter, like Control, WD:L etc which haven't had a FSR2 patch, then you only have one option. Performance wise FSR 2 vs DLSS isn't too bad on the higher end because of how costs scale for upscaling, but again not ideal. Not an issue tho imo.
The problem with FSR3 for what you're saying is that it will also be notably inferior to DLSS3 but not only are we talking qualitative differences, but also think about the performance. On ADA you have a specific hardware unit to accelerate and handle it, which as we can see from tests means no other part of the card is used which would otherwise take away from them being used for rendering, so that's the perfect solution - best quality, best performance. Now think of RDNA 3, it doesn't have any such hardware unit, so how's it going to work? And if it's open source & widely compatible, then how's it going to work on everything? And so it's clear it's going to run on shaders, so that's a performance penalty. Just like with FSR 2 which had a minor but still present performance disadvantage vs DLSS, which actually was magnified on older/weaker cards, but hey that's the price for compatibility.
Ultimately the biggest problem is that all these end up as compounding disadvantages. You stack worse FSR2 quality, on top of worse FSR3 quality, on top of worse FSR2 performance, on top of worse FSR3 performance, on top of higher latency (Reflex > anti-lag), on top of weaker hardware overall, and in aggregate it becomes a BIG issue. So how cheap is AMD going to price its cards to make up for all this lost ground (to say nothing of the fact that they never have these solutions out on day 1, let alone innovating and beating Nvidia to the punch).
The sad truth is that Radeon's slowly gotten worse over the years and all of these things accumulated, so what used to be a contested battle is now clearly a clean sweep by Nvidia. So that's why people will buy Nvidia over AMD, even with a successful FSR3.
As for them not releasing it because they fear for RDNA 3 sales, nah, they simply don't have it ready, and they sold out of RDNA 2 so that's not an issue either (not that it ever was, given the limited quantity). Ultimately it's still (RDNA 3) AMD vs Nvidia, as always, and the latter have released DLSS3, so if AMD's just sitting on it then it's only hurting itself.
