Iphone SE users aren't a small pool of users.

The decision by Apple is either based solely on making more money short-term/mid-term while ignoring a part of their customer base, or waiting for the right entry point with introduing a new bigger full screen but overall smaller model.

Many things Apple did in the early days weren't making sense from a market standpoint, like giving away software for free. At least that's what MS would have told you at that time.

That's why it's hard even for Apple to really price in the economic long-term cost of not supporting high-income and higly influental niche groups - there isn't only monocausality to consider when calculating ROI.