To be honest I don’t think the Mx platform in the 12 inch form factor will be good enough to be in an ultra lightweight class. I also own a 12 inch retina and while I really like that it is slient and very lightweight we probably need another generation to get that far to have good passive cooling and performance given that the form factor will have to put the battery and motherboard on top of each other. A bezel shrink with a notch would still work out though but it would need a high ppi and 500 nits brightness will further tax the battery.
Given that the M1 doesn't throttle in a 10 inch ipad with passive cooling I think Apple absolutely could build a M1/M2 11 inch air or 12 inch macbook. They either haven't gotten to it or are deliberately avoiding going down into ipad size territory with macbooks.
According to their page the Macbook Air is the world's best selling laptop so presumably there's some market. I also went from an 11" air to the M1 and miss the smallness of the 11".
