the Series S is totally optimized for price. I would assume that after the major shrink they will be able to sell the box in the $150-$200 territory, which might mean an "impulse buy" for many once games are coming.
I would also assume that some the small Series S dies were located on the corner of the expensive and limited wafer, making these area usable which otherwise would have to be thrown away, giving them those chips "for free". A larger die would reduce this advantage.
The Series S is what it is for a reason, and it seems to do its job "good enough". Making it too good might mean that some people would buy the Series S instead of the now relativly more attractive Series X. Now it is too late to discuss about it.