"I think one of the reasons is because the iPhone 6 has sold so well," Arcuri said. "And they said, 'look, why would we want to cannibalize? If we came out with an iPhone 6C, we would essentially cannibalize a price-reduced iPhone 6.'"
The bottom line is that Apple knows how exactly how well the iPhone 6 is selling compared to the larger iPhone 6 Plus. If there were a real demand for a smaller iPhone then I have no doubt that Apple would release one. However, given how well the iPhone is selling, switching up to larger displays doesn't seem to have harmed the sales.