I thought it was a recent idea, to do with, as you say, the idea of him coming down the chimney at Christmas.
However, there is an intriguing quote in the Geiriadur Prifysgol Cymru-
“1923 - J. Glyn Davies: Cerddi Huw Puw xxv, The history of Sion Corn is unknown to me any further back than my father’s dialogues with him in the seventies. He had some mysterious interest in getting off to bed early, and a more rational habit of making presents at Christmas, as a Welsh Santa Claus. I do not know whether my father found him in Edern, his mothers home, or invented him. Anyhow, Sion Corn has done untruthful and amiable service for two generations.”
Perhaps there was a song about him in “Cerddi Huw Puw”, a very popular song book for children?
If so, it seems, reading between the lines, that Sion Corn was [as above] a rather “benevolent” bogeyman type figure living up the chimney, little known, perhaps even simply a family tradition, until made more popular by a song in “Cerddi Huw Puw”.
That’s just a guess though.