After the Fall of the Eggman Empire,Eggman was shortly arrested,then executed.
Little did everyone know that Eggman had a hidden factory that activates once he died,The Neo Egg Pawns are different than the original Egg Pawns,This is because they were meant to be used as a last resort.
The reason why there are millions of them,is because Eggman created a cloning device,without telling anyone (He also hid it,to prevent Sonic from destroying it.) that is used to clone said ores made to make the N.E.P's to save time,The N.E.P's shells also explode,that's because Eggman doesn't want to cause an inflation,rendering said ores worthless,c'mon,he's evil,but not that evil.
Type 2s are far more intelligent than Type 1s,They are also not as perverted as the Type 1s (A protocol of the N.E.E. states that Type 1s cannot witness the Roboticization Process on Females,This is because Type 1s are kind of perverted,Although,not on Master Roshi levels of perverted,Type 2s are allowed to witness the Roboticization Process on Females,but they must be watched by Type 3s.),Even though Type 2s are far more intelligent,They feel sorry for the Type 1s,Although they don't show it often.