Obviously a made up scenario because systems engineering (as the discipline most likely to be involved in the provided scenario) is all about balancing competing requirements and dealing with design constraints such as available choice of materials, or acceptable cost to consumers, or any other number of criteria.
Systems engineers would have responded by informing this hypothetical Steve Jobs that if he wanted to make the phone smaller by 20%, the phone would lose 10% processing power and lose 30% battery capacity, 9 months and $50m would need to be expended to retool the factories, and 12 months and $40m would need to be expended to redesign software UI for a smaller screen. And for an accurate answer, those systems engineers would have needed to have been able to consult with materials scientists, software engineers, engineers designing factory tools, and dozens of other different types of disciplines.
He actually publicly did just this with the first iPhone. At introduction in January 2007 it had a plastic screen. He noticed the screen scratched easily in his pocket and they moved to a glass screen (and announced it) before it shipped in July.
Systems engineers would have responded by informing this hypothetical Steve Jobs that if he wanted to make the phone smaller by 20%, the phone would lose 10% processing power and lose 30% battery capacity, 9 months and $50m would need to be expended to retool the factories, and 12 months and $40m would need to be expended to redesign software UI for a smaller screen. And for an accurate answer, those systems engineers would have needed to have been able to consult with materials scientists, software engineers, engineers designing factory tools, and dozens of other different types of disciplines.