It seems Harvard will be less competitive among high-achieving students, then. I think it's a poor strategic move and will undermine the quality of incoming classes in future.

IB credits were a source of part of my undergraduate acceleration. Absent that credit recognition, I would have chosen to attend a different university for undergraduate studies. This seems like a money grab to monetize high-performing students at no extra value to the student for an additional 1+ years.

Even in a situation where AP/IB credits are a poor approximation for freshman classes, the end product of a degree program at an elite university is a student who can produce high caliber fourth year work. That student will have to contend with upper class material upon matriculation, and be competitive within that cohort. As long as the grading mechanisms within the institution are internally consistent (big assumption, I know!), students who are under-prepared will not perform as well in later coursework.

The goal of universities should be to maximize their students' access to multiple knowledge areas, and to develop deep talent and interdisciplinary professionals. Creating arbitrary administrative barriers to that process is the reason why many smart students will choose more flexible programs, or forego university altogether, if they can hack an education better on their own.
What is to give light must endure burning.