Do you remember, back in the day, when the smallest IBM thinkpads were way more expensive than the less-small IBM thinkpads?
I understand big phones are king if you only have one device. If I wasn't carrying like five devices all the time, I'd also want a giant phone-tablet, and I guess these days, most people don't have computers, and if I didn't have a computer, I'd want a really giant phone. But I am carrying five devices all the time, and I do have desktops everywhere I spend significant time, so I want my phone to be small and easy to operate with one hand.
As far as I can tell, there's a pretty big correlation between having a good income and having multiple devices. What I'm saying is that giant phones can be seen as... kind of the low end of the market.
And it's not like apple needs to stop making giant phones; they just need to make a small phone for the high end. That, or they need to upgrade functionality on the watch to the point where I can just use the watch for everything, but as far as I can tell, app developers are moving in the other direction (Last time I dropped off my phone for repair, I found that lyft had disabled it's watch app, and the uber watch app doesn't work reliably without the phone nearby. I mean, I got the uber watch app working once I got my phone back, but it's just not designed to function as the backup for your transportation app that I wanted. It was kind of annoying; I ended up calling a friend on the watch, 'cause txt messages weren't working, either. Walking around shouting into my watch like I thought i was dick tracy)
Personally, I'm actually pretty happy paying apple prices for a new phone every two years or so, but you've gotta give me a reason. I mean, if you came out with a really nice small phone, I'd even be willing to pay big phone prices for it; I'm not really that price sensitive when it comes to things like my cellphone, but I really don't have a lot of desire to buy the new phones, just 'cause they are all so big, and as far as I can tell, they don't do anything I want any better than my iphone 7. (I don't hate face ID, but as far as I am concerned, it's not any better than the fingerprint)
If Apple came out with a 3d-touch capable iphone SE sized phone with lots of memory and really good cell reception/networking features? Yeah, I could see me paying a grand for it.
In the olden days, when Apple was much smaller, they were ironically freer to just make the best device possible because success would be meaningful in very small markets. The OG iPod saved them despite selling relatively tiny numbers. Nowadays, markets that used to matter significantly to Apple -- education, media, creatives -- are allowed to wither and die because they are a blip on the bottom line.
I don't see what could change that, though. They now prioritise growth/financials/share price over pure products in a very calculating way, but what corporation doesn't? You need an exceptional mandate to do otherwise, and only the Bezos's and Jobs's of the world get those.
So the pity is that as a result we'll continue to see Apple pushing hard into services and (probably) media, because that's where it can smell growth. That might keep the numbers up, but I suspect it's going to transform what Apple is even further away from the "make great products" company we knew into ... something else. (Probably something less great, given their track record with services, tbh.)
I think this is one of those situations where you count dollars rather than heads.
My understanding is that the "next billion users" push that all the big companies are doing is a bit like putting macs in schools. It is a long-term plan 'cause yes, the developing world is poor right now. maybe those people who are poor now won't be poor in the future, and if they know how to use your ecosystem, that's great for you. It certainly seems like a good idea, but I don't think it's where you make your money today.
I really think if you were serious about that plan, you'd come out with a giant low-end phone; You remember the thinkpad W series? something like that. big and clunky and cheap. Apple needs an iphone 5c level cheap plastic reskin of last year's big phone for that.
The market you're really talking about them capturing with a small premium phone is "rich people who have multiple devices and want a small phone and when they can't get one they buy an Android phone or make do with an SE". I'd wager that's small in most terms, certainly in Apple terms -- whether you're talking dollars or heads.
But what do the top-end Chinese consumers do when Apple doesn't have a phone that appeals to them? They buy one of the other flagships that run WeChat, and Apple loses them. That's big in Apple terms, missed-expectations-warning big.