I seriously doubt that.
Apple has plenty of data that tells them what the demand is for a small form factor phone and how much money they can make off of it and whether it's worth an investment. They likely have the data for both a new device (reduced bezels) in that form factor and updated internals in the current SE chassis.
I think the big trouble with small form factor phones is that it becomes hard to market it as a premier/expensive device. Otherwise we'd see a Google Pixel in a small form factor as well.
And things are further complicated given that if we want to have good quality components -- speakers, cameras, microphones, etc. -- it actually costs more to make them smaller. Think about the compromises made with the 12" MB. Yet when it comes to pricing, people expect to pay in proportion to screen size. There may be a few customers here or there that will pay a premium for a small phone, but by and large, if you offer two screen sizes at the same price, nearly everyone is going to pick the larger one.