Every single person wants smaller phones. What do we get? No small phones.
Apple doesn't count… they are priced at 3x 4x what an android would cost.
People want small phones but don't want to spend their whole salary on a phone.
By and large, the only people who want small phones are those that still do most of their computing and media consumption on a PC or laptop. And that's becoming much, much rarer (and gaming doesn't really count here - lots of gamers have a separate stream or something on their phones while playing).
It's difficult to do that when the available phones are just getting bigger. Ten years ago you could still find sub 6" phones easily. These days, not so much.
Consider how small the overlap is between devices in a product lineup in the first place and an audience that can buy them -- whether that's through carrier availability to put them on plans if in the US, or the resources to spend on them up-front.
That trend also is based on touch as the primary method of interaction -- but given the tethered AR devices we're starting to see trickle out, and Android's desktop mode finally hitting prime time, that assumption might not hold long-term. I'm not saying this will be the timeline we live on, but considering some of the experiments with dedicated, external devices for powering them, it's not hard to envision the pendulum swinging back toward smaller phones that focus more on things like the compute and sensors and less around a screen you look at all day.
Think of the (modern) Moto Razr. You could, hypothetically, have a compute device that more so resembles the folded-down version of this -- aimed more toward external displays, and less toward being regularly looked at.
Similarly, I don't know a single person that likes to eat dodo eggs.