Whoops! Thanks. I made the necessary correction to my comment. Changed "did" to "didn't".
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Considering they didn't realize the 4 inch model would be so popular, I agree with you, only because I can't imagine they'll have gotten their act together quickly enough after realizing their mistake in order to be able to push out a flagship 4 inch device. But it might make it out in time for the "s" revision now that they've realized their error. I just can't believe Apple, of all companies, didn't do good enough market research to know that a modern-spec'd 4 inch model would do really well.
And I think cell phone sales are only dropping recently because they have started to hit the saturation point within 1st world markets. The SE will help greatly with getting past that, but people within the 1st world markets clearly want a flagship 4 inch model.
If Apple remains locked out of China . . . well it will not be so sunny around Apple for a while, 4" phone or not.
While the 4" iPhone is popular with some its main selling feature would be the price.