I use a daily combo of iPhone 12 mini and iPad Air 4 and have no issues whatsoever with this setup. However, I am the only one of the people around me with such a “small phone”. I did see a few minis in the wild
, but they are in absolute minority.
Do not forget that Apple know the exact number of iPhones (old and new) in circulation and all possible usage patterns (stationary, on the go, in the car, etc.), so when they make their decisions they are guided by the actual demand and a potential profit. Simple as that.
Also, iPhone is not a house we buy, it has become a daily communication & productivity tool for lots of people, who are very unlikely to keep it for longer than 5 years anyway (both software & hardware ageing/obsolescence).
Everything - web-based apps, productivity apps, content consumption are currently geared towards screens around 6” and higher, the rest is marginal.
My personal hope is that Apple at some point will bring back another sub-6” screen, say in a rumoured 5.7” iPhone SE 2023 shape, but if not - I will be just fine with their other smallest offering, as long as it has a good camera and a decent battery.