You forgot that there are still plenty of iPhone 5s, 6, SE, and 6s users who are probably looking for an upgrade this year.
And don't underestimate emerging markets. Sure, majority of the population will opt for $100 phones as that's the genera purchasing power, but there are plenty of rich people in those markets as well who want iPhones. What Apple imo need to work harder is to support in those region. I mean heck, the News app itself is not available in many markets, which is hurting Apple's aim to provide services to their customers. Take SE Asia. Apple was late and Samsung has taken over the general brand mindset, but Apple is trying now with more stores and app support.
You don't see louis vuitton or Hermes trying to gain marketshare nor selling cheap stuff. Yet they have outlets in the emerging markets as well.
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Apple is not targeting Xs users. Apple is targeting the 5s/6/6s/7 users. This is why we have yearly incremental upgrades. Apple is not looking at those who just purchased their phones last year. Those people will be served by the 2020 iPhones. It's been like this since the 3GS.