I think the mini was competing against the SE, that was also small and even cheaper.
I think the natural thing to do would be to make the SE option smaller again. The 16e just doesn't make much sense in the lineup. Apple released 5 iphones this year:
16e: 6.1" screen, $599
17: 6.3" screen, $799
Air: 6.5" screen, $999
17 pro: 6.3" screen, $1099
17 pro max: 6.9" screen, $1199
That makes a lot more sense than what the currently have for sure
There just isn't much diversity there for screen size. I think a "17e" (or 18e?) with a screen less than 6" would make a lot of sense. Many have pointed to the iphone x. That would be perfect (5.8"). They could probably keep that body and many of the components, just upgrade specs and components, maybe charge less than $600 and it would sell well.