It does, actually, with neutron producing fuels. The problem is that volumetric power density is limited by the areal power density limit on the wall of the reactor, and by the need of a sufficiently thick blanket to absorb neutrons. The inferiority vs. fission is roughly (thickness of fusion reactor blanket)/(diameter of fission reactor fuel rod). This is independent of any details of plasma confinement.
Something like ARC has much higher power density than ITER, but it's still very inferior to fission reactor. ITER's power density is just so incredibly bad.
Does it matter? Fusion doesn't have the same power per unit volume as fission in order to be usable on a ship, it just has to be good enough to be usable in that application: i.e. able to produce maybe in the neighborhood of a couple hundred kilowatts continuously without being overly bulky or expensive.
There might be limits though on how small the reactor can be made. ARC is apparently meant to produce hundreds of megawatts, which sounds like it maybe be two or three orders of magnitude more powerful than what even a large container ship would use for propulsion. SPARC is a physically smaller reactor, but not intended for continuous or long-term use. If the basic design works out, probably the first real-world designs will be optimized for utility power generation, where size doesn't really matter except to the extent that "bigger" tends to mean "more expensive". Minimum-size designs might take longer to show up.
If I understand correctly, the ARC design uses FLiBe to capture the energy from the neutrons. It takes up the space between the vacuum chamber and the outer housing. The FliBe heats up, and is pumped out into heat exchangers that produce steam to run a turbine. At some point there's a practical limit to the amount of heat that can be removed that way, but it seems like a low-output reactor should be easier rather than harder to make from that standpoint.
"Hundreds of megawatts" may be oversized for ship application, but maybe more like 2x to 10x oversized rather than 100x to 1000x. Or maybe not. Apparently they use some pretty powerful reactors in aircraft carriers: https://en.wikipedia.org/wiki/A4W_reactor
It does, actually, with neutron producing fuels. The problem is that volumetric power density is limited by the areal power density limit on the wall of the reactor, and by the need of a sufficiently thick blanket to absorb neutrons. The inferiority vs. fission is roughly (thickness of fusion reactor blanket)/(diameter of fission reactor fuel rod). This is independent of any details of plasma confinement.
Something like ARC has much higher power density than ITER, but it's still very inferior to fission reactor. ITER's power density is just so incredibly bad.