They're stuck on the privacy angle, because what it means is you can't call remote services. You'll always have access to more resources at a data-center than a phone. So, while the frontier of what's possible with purely-local models will keep advancing, it'll never exceed what's possible with remote models.

People care about extra privacy when the delta in capability is minimal. But people won't allow a massive discrepancy, like the difference between a 8B model and a 700B model.