I think that they should reduce as much as possible, the background services, telemetry, animations, etc to try to allow battery power to last longer, reduce service fees for internet, etc. Privacy is one issue but it is not the only one. (Furthermore, some manufacturers will include hardware kill switches, which might be able to further reduce power requirements and improve privacy and security.) Functions can still be working if the user specifically activates and controls them, though. App permissions could be done by a proxy implementation; this allows better user controls, for example you can create two separate files with the same app and the files don't know each other (and later move them using file manager if wanted), or to make it access a empty contacts list or one filled in with random data instead of the actual data.
