They already have one right now... it's called the iPhone 7 and it's their "new" budget phone. If you understand business at all then you must understand something called ROI (return on investment). There simply isn't enough ROI to engineer, design, market and manufacture a brand new small screened "budget" device. Trying to get that return by selling a "premium" small screened phone at a high price would fail miserably in the market.
The SE is dead. If you need a new budget phone the iPhone 7 (or 8 if you want a step-up) are your best options.
Tell that to my wife, while her SE is still going strong, she has already asked about compact Android phone options if the SE didn’t get an update. I’ve used an Android phone since I retired my ip4, but I’m not looking forward to transitioning her to Android.