The main reason for this is the Service Host: Local System is composed of different bundle processes. They would be operating directly through the system. There is a chance that there are a lot of corrupted files that are available, and the system has not been able to remove all of those corrupted files just yet. If this is your current problem now, you can solve this by running the System File Checker.
You can check the different files that the system would need to use. After that, the corrupted system files will be subsequently fixed. Once the files are fixed or are removed, the Service Host: Local System will not be using up too much space on your computer anymore.
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