There are lots of phone manufacturers who have no ads business. They just make phones so why would they care?
Size is dictated by trouser pocket size/handbag size and usage. Editing photos and movies to upload onto social media is probably better on a big screen.
Also screen size is dictated by common panel sizes, as low volume will mean a higher price.
Folding screens and iPad Mini's existence suggests people want larger screen real estate.
And so while there are people who want "small screen + nice camera". There are people who want "small screen + small price". There are many people who _don't want the small screen_. So you have this phone that can cost a lot of money (in a pretty messy market where most phone models seem to not make money anyways), and you're going to cut off chunks of the market?
So we end up with small screen + shitty camera and specs etc. And people here who want a small phone (but really want a small phone that isn't miserable to use) still are unsatisfied.
There are still bound to the screen resolution dictated by the platforms/environment. A maker selling an android phone with a 480x640px screen would face a huge uphill battle to see any sales.
Going for a smaller physical screen means higher DPI, so higher production costs and quality control issues. It can make more sense to buy cheaper, low DPI screen and make the whole device bigger to match the needed pixel count.
I mean... none of the big ones.
For the others, they DO make small phones, and even non-addictive phones. We have e-ink phones in pure black and white.