Running tests and then fusing off broken cores or shared caches helps to recover lots of yield for bigger chips. Certain parts of the silicon is not redundant, but Intel's designs have redundancy for core pieces and chunks that are very large and hence probabilistically more prone to a manufacturing error.

Yep, cerebras takes that thing to the next level with their "wafer chips". A common technique is killing defective cores entirely (how all cheaper CPUs are made).

But reducing size will still increase yield since you can pick and choose.