I can not figure it out. If miners get less and less BTC each halving wouldn't they eventually start decreasing hash power when BTC value stops rising making the blockchain prone to 51% attack?
Decreasing hashrate might happen. However, miners can also invent more electricity efficient ASICs and exploit cheaper forms of electricity.
Both of youare somewhat incorrect. BTC value has nothing to do with hashpower, an increasing difficulty and a reducing hashpower will also directly corelate to a decreasing supply for btc. making the existing btc rise in value, given other conditions are stable. once all the btc is mined, miners will only depend on tx fees instead of block rewards.
And i do not think there is room for much more innovation from the hardware size as it is pushing the physical limits of what is possible right now.