1. Cheaper iPhone
2. You don’t want to carry a big iPhone and you have a Mac/iPad nearby anyway for anything complicated so a big phone is unnecessary.
The second case should motivate wanting eg their ‘pro’ cameras in the small phone but the first case motivates making it cheap and low-margin. You can also imagine a world where apple markets a mini phone as also being an optional companion to a bigger phone, but they already have the watch for that.