> but the reduced bill of materials on smaller phones should allow a better profit margin?

Is there a significantly reduced bill of materials? At best, the correlation between size and cost is very small. Most of the costs are in software, manufacturing, etc, not in materials.

Also, would there be a better profit margin? I bet customers won’t want to pay the same for a smaller phone, certainly not give that it will have lower battery life (power usage will, at best, go up with screen area, and battery volume will go up faster than phone volume because parts such as CPUs will not be smaller in smaller phones)