block size does not harm decentralization, how block size is increased can do that. for example if you increase it suddenly to a much bigger number now it will end up centralizing bitcoin but if it is increased slowly with the advancement of hardware and internet speed then it can't do much harm.
There's still a larger problem here that most people don't discuss. Even if hardware advancement allows us to significantly increase block sizes over time, that doesn't address whether doing so is compatible with Bitcoin's hard cap on supply.
Without inflation, the system needs fee revenue to continue incentivizing miners. The block size limit is the only means we have to enforce scarcity of block space, which guarantees fee revenue. Otherwise, Bitcoin's Byzantine fault tolerance may be threatened as block rewards decline in value. You can't have a network worth many billions or trillions of USD where miners have no incentive to secure the network.
in my opinion higher fees will kill bitcoin so if block size scarcity is enforced in the future*, remember that bitcoin was meant to be a decentralized currency not something people only trade or store value in so they don't care if they pay a high fee to transfer it. it may also nullify what you are saying since people would stop using bitcoin and consequently the price would drop and there wouldn't be any more profit for them miners anymore.
bigger capacity also means more transactions, and that means more transaction fees in total.
* note that i am saying in the future, as of today and in the close future we don't need block size increase or even fees to replace the block reward since it is quite high still and will remain high for many years.