I definitely think Apple and Samsung can do a smaller premium phone if they want to as Apple makes the lion's share of profits in the industry and Samsung is the only other manufacturer that makes a significant amount of profit. Heck Samsung can probably do a smaller midrange phone as well. I do not think it makes sense for other manufacturers as they make 3% profit and targeting a very vocal but demanding minority isn't going to help them improve that.
Small phone users should also temper their expectation, I saw a lot of comments from people saying they didn't get the iPhone mini because they expected the Pro Max's specs in the mini form factor. They have to understand that the cameras on the biggest flagships occupy a lot of space and it isn't feasible to bring it to a smaller form factor. Increasing the thickness might help with the battery but that's about the only component that benefits with an increase in one dimension.
Seems like an overclocked version of the 7+Gen 3, interesting they didn't release that chip with this one.