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There's definitely a market for these - my partner prefers a more compact phone, it has been harder and harder to get a decently spec'd small phone of late. There are certain niche markets for small devices and alwasy will be
but the big phone manufacturers don't realize there's a market for this and they completely neglect that. or rather, they know that there's a market for it but they know it won't make them enough profit so they stick with the mainstream, which is a huge shame. i'm sure that there are engineers working at google, samsung, etc. who would love to work on smaller phones, phones with other unique hardware such as trackballs, but aren't able to because of "turn everything into money" mindset.
It is strange, it may be a small market niche (pun intended) but surely its worthwhile for someone to jump into it, particularly given that it could be satisfied with existing technology, no great advances required