The steel defender can take reactions as normal (doesn’t require the artificer to instruct it), so because it is not surprised, it can also use deflect attack to protect the (surprised) artificer.

Surprised has other mechanical effects, e.g. the Bugbear’s surprise attack: “If you surprise a creature and hit it with an attack on your first turn in combat, the attack deals an extra 2d6 damage to it.” which therefore wouldn’t work against the steel defender.

So whilst the steel defender is limited in what it can do if its master is surprised, it’s certainly not a useless trait.

The steel defender can take reactions as normal (it doesn’t require the artificer to instruct it), so because it is not surprised, it can also use its Deflect Attack reaction to protect the (surprised) artificer.

Surprise has other mechanical effects, e.g. the Bugbear’s Surprise Attack trait:

If you surprise a creature and hit it with an attack on your first turn in combat, the attack deals an extra 2d6 damage to it.

...which therefore wouldn’t work against the steel defender.

So whilst the steel defender is limited in what it can do if its master is surprised, it’s certainly not a useless trait.