I half suspect that Apple will be coming back with another small phone a few years down the line and then a cycle will continue where they will always have something like an SE or mini, but it won't ever be flagship level.

I feel like that has been the problem with the Mini. I love mine (which I got because I was fed up with Pixel and Android in general), but I know I only have it because I got in at the right time. My wife bought an iPhone at the wrong time and hers is comically large. She would have happily bought an iPhone Mini if it had been available that year. By the time she needs a new iPhone, it will be another year where the only options are gigantic.

because covering costs is not the same as maximizing profit