I don't think the objective is to make it a "superior product" in the somewhat circular way you're defining it (i.e., the market equilibrium that we settled on). It's one of several measures to try to have people keep their phones for longer and cut e-waste.
Slow down innovation is certainly one way to have people keep their phones longer and cut e-waste. Imagine if they allowed air conditioners...
I think it’s far more likely to introduce additional dead batteries into existing waste. Probably drop in an ocean given how much batteries are already dumped.
Also Products aren't being designed for individuals anymore. There being designed to maximize for ad revenue, we're the product.
If there is any incentive to make a product better is to make it more accessible to their first party customers.