People don't buy phones every year. People don't want to pay 95% price for 80% of performance / features.

Smaller phones as an idea isn't the problem here. Companies just don't want to make equivalent smaller phones. Making a new phone every single year is a stupid trend that causes min-max effects. A good small phone will eat into profits that's harder to make up in a yearly cycle. People will not buy nerfed smaller phones which is a positive feedback cycle.

> People don't want to pay 95% price for 80% of performance / features.

I want to believe this too but you have to look at iPhone sales numbers

exactly. it's a fashion issue. as in literal fashion.