and hardware innovation has stalled out. Because of course it has. They don't have the space of a dedicated camera.

You're totally not going to fit even a micro four thirds sensor in a phone, but there are a bunch of Chinese phones with larger sensors. Although they can be a PITA to find if you're on the US, reviews like them.

I suspect the reason why we don't see them from the mainline phone manufacturers comes down more to hardware BOM cost than packaging or size.