"With the iPhone 5se, Apple may be aiming to introduce a device that's going to deliver up-to-date features to customers who prefer smaller devices while still refraining from competing with its flagship 4.7 and 5.5-inch iPhones."
This is insane. First of all, Schiller was just quoted the other day saying that Apple wants their devices to cannibalize sales from others of their devices.
There's no reason why this form factor should not be a "flagship" device. What does Apple care which flagship device people are buying? They're still selling phones. In fact, they stand to sell more phones if they make three different sizes of phones that are all technically equal inside. They'll potentially get sales from current Android users who want a smaller phone, and are willing to buy an iPhone if it's got the latest tech, but not willing to downgrade in tech to get a smaller phone.