I'm not surprised that small phones aren't a big market segment, but I am surprised there's not a single maker trying to dominate that niche.
Sony used to, as the article mentions. I suspect their sales were low in large part because their prices weren't competitive. Some other niche player could easily have that market, especially if they did a little better on the value proposition. Alternately, Samsung launched 29 phones in 2024 or 2025; it's surprising that they don't include a single small model to address a market segment that, while not the largest, seems very devoted to that preference.
My best guess is that we're an unprofitable segment for other reasons. I, for one am not going to regularly buy new phones just because they're new. I'm also not going to use any bundled bloatware; I'll change defaults; I won't subscribe to many, if any services; I'll block ads aggressively. I'll even try to pay developers for apps outside of the built-in store, though that's rarely possible. Anybody who sells me a phone is probably not going to make any profit from me other than the margin on the purchase price, and while I'm willing to pay a little extra for the phone I want (5" screen, headphone jack, unlockable bootloader), I'll balk at an extreme premium.