Nobody besides Apple knows the exact reason(s), but I'd guess it's because they determined that enough users were attached to the ecosystem that they could upse

Nobody besides Apple knows the exact reason(s), but I'd guess it's because they determined that enough users were attached to the ecosystem that they could upsell more of them on a larger/more-expensive phone, than they would lose to competitors. Presumably that profit difference is smaller than the cost to develop a new form factor.